Correlation Between Groenlandsbanken and First Farms
Can any of the company-specific risk be diversified away by investing in both Groenlandsbanken and First Farms 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 Groenlandsbanken and First Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Groenlandsbanken AS and First Farms AS, you can compare the effects of market volatilities on Groenlandsbanken and First Farms 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 Groenlandsbanken with a short position of First Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groenlandsbanken and First Farms.
Diversification Opportunities for Groenlandsbanken and First Farms
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Groenlandsbanken and First is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Groenlandsbanken AS and First Farms AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farms AS and Groenlandsbanken 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 Groenlandsbanken AS are associated (or correlated) with First Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farms AS has no effect on the direction of Groenlandsbanken i.e., Groenlandsbanken and First Farms go up and down completely randomly.
Pair Corralation between Groenlandsbanken and First Farms
Assuming the 90 days trading horizon Groenlandsbanken AS is expected to generate 0.68 times more return on investment than First Farms. However, Groenlandsbanken AS is 1.46 times less risky than First Farms. It trades about 0.04 of its potential returns per unit of risk. First Farms AS is currently generating about -0.01 per unit of risk. If you would invest 56,643 in Groenlandsbanken AS on August 25, 2024 and sell it today you would earn a total of 12,357 from holding Groenlandsbanken AS or generate 21.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Groenlandsbanken AS vs. First Farms AS
Performance |
| Timeline |
| Groenlandsbanken |
| First Farms AS |
Groenlandsbanken and First Farms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Groenlandsbanken and First Farms
The main advantage of trading using opposite Groenlandsbanken and First Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groenlandsbanken position performs unexpectedly, First Farms 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 First Farms will offset losses from the drop in First Farms' long position.| Groenlandsbanken vs. Dataproces Group AS | Groenlandsbanken vs. cBrain AS | Groenlandsbanken vs. ALK Abell AS | Groenlandsbanken vs. ChemoMetec AS |
| First Farms vs. HH International AS | First Farms vs. SKAKO AS | First Farms vs. Spar Nord Bank | First Farms vs. Matas 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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