Correlation Between Skjern Bank and FLSmidth
Can any of the company-specific risk be diversified away by investing in both Skjern Bank and FLSmidth 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 Skjern Bank and FLSmidth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skjern Bank AS and FLSmidth Co, you can compare the effects of market volatilities on Skjern Bank and FLSmidth 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 Skjern Bank with a short position of FLSmidth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skjern Bank and FLSmidth.
Diversification Opportunities for Skjern Bank and FLSmidth
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Skjern and FLSmidth is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Skjern Bank AS and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and Skjern Bank 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 Skjern Bank AS are associated (or correlated) with FLSmidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLSmidth has no effect on the direction of Skjern Bank i.e., Skjern Bank and FLSmidth go up and down completely randomly.
Pair Corralation between Skjern Bank and FLSmidth
Assuming the 90 days trading horizon Skjern Bank is expected to generate 1.5 times less return on investment than FLSmidth. But when comparing it to its historical volatility, Skjern Bank AS is 1.21 times less risky than FLSmidth. It trades about 0.05 of its potential returns per unit of risk. FLSmidth Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 22,995 in FLSmidth Co on September 4, 2024 and sell it today you would earn a total of 15,105 from holding FLSmidth Co or generate 65.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skjern Bank AS vs. FLSmidth Co
Performance |
| Timeline |
| Skjern Bank AS |
| FLSmidth |
Skjern Bank and FLSmidth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skjern Bank and FLSmidth
The main advantage of trading using opposite Skjern Bank and FLSmidth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skjern Bank position performs unexpectedly, FLSmidth 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 FLSmidth will offset losses from the drop in FLSmidth's long position.| Skjern Bank vs. FLSmidth Co | Skjern Bank vs. Danske Bank AS | Skjern Bank vs. ISS AS | Skjern Bank vs. DSV Panalpina 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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