Correlation Between TRON and Danske Bank

Can any of the company-specific risk be diversified away by investing in both TRON and Danske 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 TRON and Danske Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRON and Danske Bank AS, you can compare the effects of market volatilities on TRON and Danske 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 TRON with a short position of Danske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and Danske Bank.

Diversification Opportunities for TRON and Danske Bank

0.22

Correlation Coefficient

TRON  Danske Bank

Modest diversification

The 3 months correlation between TRON and Danske is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TRON and Danske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Bank AS and TRON 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 TRON are associated (or correlated) with Danske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Bank AS has no effect on the direction of TRON i.e., TRON and Danske Bank go up and down completely randomly.

Pair Corralation between TRON and Danske Bank

Assuming the 90 days trading horizon TRON is expected to under-perform the Danske Bank. In addition to that, TRON is 2.62 times more volatile than Danske Bank AS. It trades about -0.16 of its total potential returns per unit of risk. Danske Bank AS is currently generating about 0.05 per unit of volatility. If you would invest  1,400  in Danske Bank AS on January 18, 2024 and sell it today you would earn a total of  35.00  from holding Danske Bank AS or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

TRON  vs.  Danske Bank AS

TRON

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TRON is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Danske Bank AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Danske Bank may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with TRON and Danske Bank

The main advantage of trading using opposite TRON and Danske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON position performs unexpectedly, Danske 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 Danske Bank will offset losses from the drop in Danske Bank's long position.

The idea behind TRON and Danske 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.