Correlation Between ISS AS and Skjern Bank
Can any of the company-specific risk be diversified away by investing in both ISS AS and Skjern 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 ISS AS and Skjern Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ISS AS and Skjern Bank AS, you can compare the effects of market volatilities on ISS AS and Skjern 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 ISS AS with a short position of Skjern Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISS AS and Skjern Bank.
Diversification Opportunities for ISS AS and Skjern Bank
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between ISS and Skjern is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding ISS AS and Skjern Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skjern Bank AS and ISS AS 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 ISS AS are associated (or correlated) with Skjern Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skjern Bank AS has no effect on the direction of ISS AS i.e., ISS AS and Skjern Bank go up and down completely randomly.
Pair Corralation between ISS AS and Skjern Bank
Assuming the 90 days trading horizon ISS AS is expected to generate 3.34 times less return on investment than Skjern Bank. But when comparing it to its historical volatility, ISS AS is 1.29 times less risky than Skjern Bank. It trades about 0.02 of its potential returns per unit of risk. Skjern Bank AS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 16,221 in Skjern Bank AS on November 5, 2024 and sell it today you would earn a total of 3,279 from holding Skjern Bank AS or generate 20.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ISS AS vs. Skjern Bank AS
Performance |
| Timeline |
| ISS AS |
| Skjern Bank AS |
ISS AS and Skjern Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ISS AS and Skjern Bank
The main advantage of trading using opposite ISS AS and Skjern Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISS AS position performs unexpectedly, Skjern 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 Skjern Bank will offset losses from the drop in Skjern Bank's long position.The idea behind ISS AS and Skjern Bank AS 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.| Skjern Bank vs. Nordea Bank Abp | Skjern Bank vs. North Media AS | Skjern Bank vs. Laan Spar Bank | Skjern Bank vs. Nordfyns 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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