Correlation Between Spar Nord and Fynske Bank

Can any of the company-specific risk be diversified away by investing in both Spar Nord and Fynske Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Spar Nord and Fynske Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spar Nord Bank and Fynske Bank AS, you can compare the effects of market volatilities on Spar Nord and Fynske Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Spar Nord with a short position of Fynske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spar Nord and Fynske Bank.

Diversification Opportunities for Spar Nord and Fynske Bank

0.48

Correlation Coefficient

Spar Nord  Fynske Bank

Very weak diversification

The 3 months correlation between Spar and Fynske is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and Fynske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fynske Bank AS and Spar Nord is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Spar Nord Bank are associated (or correlated) with Fynske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fynske Bank AS has no effect on the direction of Spar Nord i.e., Spar Nord and Fynske Bank go up and down completely randomly.

Pair Corralation between Spar Nord and Fynske Bank

Assuming the 90 days trading horizon Spar Nord Bank is expected to generate 0.89 times more return on investment than Fynske Bank. However, Spar Nord Bank is 1.13 times less risky than Fynske Bank. It trades about 0.25 of its potential returns per unit of risk. Fynske Bank AS is currently generating about 0.12 per unit of risk. If you would invest  11,380  in Spar Nord Bank on January 25, 2024 and sell it today you would earn a total of  940.00  from holding Spar Nord Bank or generate 8.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Spar Nord Bank  vs.  Fynske Bank AS

Spar Nord Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spar Nord Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Spar Nord displayed solid returns over the last few months and may actually be approaching a breakup point.

Fynske Bank AS

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fynske Bank AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Fynske Bank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Spar Nord and Fynske Bank

The main advantage of trading using opposite Spar Nord and Fynske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spar Nord position performs unexpectedly, Fynske Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fynske Bank will offset losses from the drop in Fynske Bank's long position.

The idea behind Spar Nord Bank and Fynske Bank AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.