Correlation Between Wex and Danske Invest

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Can any of the company-specific risk be diversified away by investing in both Wex and Danske Invest 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 Wex and Danske Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wex Inc and Danske Invest Fjernsten, you can compare the effects of market volatilities on Wex and Danske Invest 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 Wex with a short position of Danske Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wex and Danske Invest.

Diversification Opportunities for Wex and Danske Invest

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Wex and Danske is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and Danske Invest Fjernsten in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Fjernsten and Wex 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 Wex Inc are associated (or correlated) with Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Fjernsten has no effect on the direction of Wex i.e., Wex and Danske Invest go up and down completely randomly.

Pair Corralation between Wex and Danske Invest

Considering the 90-day investment horizon Wex Inc is expected to generate 1.83 times more return on investment than Danske Invest. However, Wex is 1.83 times more volatile than Danske Invest Fjernsten. It trades about 0.05 of its potential returns per unit of risk. Danske Invest Fjernsten is currently generating about -0.04 per unit of risk. If you would invest  16,757  in Wex Inc on December 30, 2023 and sell it today you would earn a total of  6,996  from holding Wex Inc or generate 41.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Wex Inc  vs.  Danske Invest Fjernsten

 Performance 
       Timeline  
Wex Inc 

Risk-Adjusted Performance

21 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Wex Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Wex showed solid returns over the last few months and may actually be approaching a breakup point.
Danske Invest Fjernsten 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Danske Invest Fjernsten has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, Danske Invest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wex and Danske Invest Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wex and Danske Invest

The main advantage of trading using opposite Wex and Danske Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wex position performs unexpectedly, Danske Invest 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 Invest will offset losses from the drop in Danske Invest's long position.
The idea behind Wex Inc and Danske Invest Fjernsten 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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