Correlation Between Vestas Wind and Danske Bank
Can any of the company-specific risk be diversified away by investing in both Vestas Wind 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 Vestas Wind and Danske Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Danske Bank AS, you can compare the effects of market volatilities on Vestas Wind 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 Vestas Wind with a short position of Danske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Danske Bank.
Diversification Opportunities for Vestas Wind and Danske Bank
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vestas and Danske is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems 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 Vestas Wind 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 Vestas Wind Systems 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 Vestas Wind i.e., Vestas Wind and Danske Bank go up and down completely randomly.
Pair Corralation between Vestas Wind and Danske Bank
Assuming the 90 days trading horizon Vestas Wind Systems is expected to under-perform the Danske Bank. In addition to that, Vestas Wind is 1.69 times more volatile than Danske Bank AS. It trades about -0.05 of its total potential returns per unit of risk. Danske Bank AS is currently generating about 0.08 per unit of volatility. If you would invest 12,779 in Danske Bank AS on November 2, 2024 and sell it today you would earn a total of 8,941 from holding Danske Bank AS or generate 69.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vestas Wind Systems vs. Danske Bank AS
Performance |
| Timeline |
| Vestas Wind Systems |
| Danske Bank AS |
Vestas Wind and Danske Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Danske Bank
The main advantage of trading using opposite Vestas Wind and Danske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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.| Vestas Wind vs. Orsted AS | Vestas Wind vs. Danske Bank AS | Vestas Wind vs. Bavarian Nordic | Vestas Wind vs. DSV Panalpina AS |
| Danske Bank vs. Bavarian Nordic | Danske Bank vs. DSV Panalpina AS | Danske Bank vs. Vestas Wind Systems | Danske Bank vs. Ambu 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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