Correlation Between First Farmers and Danske Bank
Can any of the company-specific risk be diversified away by investing in both First Farmers 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 First Farmers and Danske Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Farmers Financial and Danske Bank AS, you can compare the effects of market volatilities on First Farmers 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 First Farmers with a short position of Danske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farmers and Danske Bank.
Diversification Opportunities for First Farmers and Danske Bank
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Danske is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Farmers Financial 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 First Farmers 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 First Farmers Financial 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 First Farmers i.e., First Farmers and Danske Bank go up and down completely randomly.
Pair Corralation between First Farmers and Danske Bank
Given the investment horizon of 90 days First Farmers is expected to generate 9.66 times less return on investment than Danske Bank. But when comparing it to its historical volatility, First Farmers Financial is 3.9 times less risky than Danske Bank. It trades about 0.1 of its potential returns per unit of risk. Danske Bank AS is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,526 in Danske Bank AS on November 28, 2024 and sell it today you would earn a total of 173.00 from holding Danske Bank AS or generate 11.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Farmers Financial vs. Danske Bank AS
Performance |
| Timeline |
| First Farmers Financial |
| Danske Bank AS |
First Farmers and Danske Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Farmers and Danske Bank
The main advantage of trading using opposite First Farmers and Danske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Farmers 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.| First Farmers vs. Farmers Bancorp | First Farmers vs. Farmers Merchants Bancorp | First Farmers vs. Lakeland Financial | First Farmers vs. FFW Corporation |
| Danske Bank vs. Israel Discount Bank | Danske Bank vs. Baraboo Bancorporation | Danske Bank vs. Schweizerische Nationalbank | Danske Bank vs. Jyske Bank AS |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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