Correlation Between Danske Bank and TORM Plc
Can any of the company-specific risk be diversified away by investing in both Danske Bank and TORM Plc 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 Danske Bank and TORM Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danske Bank AS and TORM plc, you can compare the effects of market volatilities on Danske Bank and TORM Plc 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 Danske Bank with a short position of TORM Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danske Bank and TORM Plc.
Diversification Opportunities for Danske Bank and TORM Plc
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Danske and TORM is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Danske Bank AS and TORM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TORM plc and Danske Bank 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 Danske Bank AS are associated (or correlated) with TORM Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TORM plc has no effect on the direction of Danske Bank i.e., Danske Bank and TORM Plc go up and down completely randomly.
Pair Corralation between Danske Bank and TORM Plc
Assuming the 90 days trading horizon Danske Bank AS is expected to generate 0.72 times more return on investment than TORM Plc. However, Danske Bank AS is 1.39 times less risky than TORM Plc. It trades about -0.01 of its potential returns per unit of risk. TORM plc is currently generating about -0.45 per unit of risk. If you would invest 19,945 in Danske Bank AS on August 29, 2024 and sell it today you would lose (70.00) from holding Danske Bank AS or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Danske Bank AS vs. TORM plc
Performance |
| Timeline |
| Danske Bank AS |
| TORM plc |
Danske Bank and TORM Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danske Bank and TORM Plc
The main advantage of trading using opposite Danske Bank and TORM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danske Bank position performs unexpectedly, TORM Plc 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 TORM Plc will offset losses from the drop in TORM Plc's long position.| Danske Bank vs. Bavarian Nordic | Danske Bank vs. DSV Panalpina AS | Danske Bank vs. Vestas Wind Systems | Danske Bank vs. Ambu AS |
| TORM Plc vs. Danske Bank AS | TORM Plc vs. DSV Panalpina AS | TORM Plc vs. AP Mller | TORM Plc vs. Vestas Wind Systems |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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