Correlation Between FLSmidth and Djurslands Bank
Can any of the company-specific risk be diversified away by investing in both FLSmidth and Djurslands 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 FLSmidth and Djurslands Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and Djurslands Bank, you can compare the effects of market volatilities on FLSmidth and Djurslands 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 FLSmidth with a short position of Djurslands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Djurslands Bank.
Diversification Opportunities for FLSmidth and Djurslands Bank
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FLSmidth and Djurslands is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Djurslands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djurslands Bank and FLSmidth 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 FLSmidth Co are associated (or correlated) with Djurslands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djurslands Bank has no effect on the direction of FLSmidth i.e., FLSmidth and Djurslands Bank go up and down completely randomly.
Pair Corralation between FLSmidth and Djurslands Bank
Assuming the 90 days trading horizon FLSmidth Co is expected to generate 1.74 times more return on investment than Djurslands Bank. However, FLSmidth is 1.74 times more volatile than Djurslands Bank. It trades about 0.06 of its potential returns per unit of risk. Djurslands Bank is currently generating about 0.09 per unit of risk. If you would invest 22,995 in FLSmidth Co on September 4, 2024 and sell it today you would earn a total of 15,045 from holding FLSmidth Co or generate 65.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
FLSmidth Co vs. Djurslands Bank
Performance |
| Timeline |
| FLSmidth |
| Djurslands Bank |
FLSmidth and Djurslands Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and Djurslands Bank
The main advantage of trading using opposite FLSmidth and Djurslands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, Djurslands 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 Djurslands Bank will offset losses from the drop in Djurslands Bank's long position.The idea behind FLSmidth Co and Djurslands Bank 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.| Djurslands Bank vs. Skjern Bank AS | Djurslands Bank vs. Lollands Bank | Djurslands Bank vs. Kreditbanken AS | Djurslands Bank vs. Fynske 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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