Correlation Between Sandvik AB and Danske Bank
Can any of the company-specific risk be diversified away by investing in both Sandvik AB 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 Sandvik AB and Danske Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB ADR and Danske Bank AS, you can compare the effects of market volatilities on Sandvik AB 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 Sandvik AB with a short position of Danske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Danske Bank.
Diversification Opportunities for Sandvik AB and Danske Bank
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sandvik and Danske is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR 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 Sandvik AB 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 Sandvik AB ADR 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 Sandvik AB i.e., Sandvik AB and Danske Bank go up and down completely randomly.
Pair Corralation between Sandvik AB and Danske Bank
Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the Danske Bank. In addition to that, Sandvik AB is 1.0 times more volatile than Danske Bank AS. It trades about -0.24 of its total potential returns per unit of risk. Danske Bank AS is currently generating about -0.06 per unit of volatility. If you would invest 1,442 in Danske Bank AS on August 27, 2024 and sell it today you would lose (39.00) from holding Danske Bank AS or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB ADR vs. Danske Bank AS
Performance |
| Timeline |
| Sandvik AB ADR |
| Danske Bank AS |
Sandvik AB and Danske Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Danske Bank
The main advantage of trading using opposite Sandvik AB and Danske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB 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.The idea behind Sandvik AB ADR and Danske 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.| Danske Bank vs. Invesco High Income | Danske Bank vs. Blackrock Muniholdings Ny | Danske Bank vs. MFS Investment Grade | Danske Bank vs. Federated Premier Municipal |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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