Correlation Between Djurslands Bank and Lollands Bank

Can any of the company-specific risk be diversified away by investing in both Djurslands Bank and Lollands 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 Djurslands Bank and Lollands Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Djurslands Bank and Lollands Bank, you can compare the effects of market volatilities on Djurslands Bank and Lollands 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 Djurslands Bank with a short position of Lollands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Djurslands Bank and Lollands Bank.

Diversification Opportunities for Djurslands Bank and Lollands Bank

0.8

Correlation Coefficient

Djurslands Bank  Lollands Bank

Very poor diversification

The 3 months correlation between Djurslands and Lollands is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Djurslands Bank and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank and Djurslands 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 Djurslands Bank are associated (or correlated) with Lollands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lollands Bank has no effect on the direction of Djurslands Bank i.e., Djurslands Bank and Lollands Bank go up and down completely randomly.

Pair Corralation between Djurslands Bank and Lollands Bank

Assuming the 90 days trading horizon Djurslands Bank is expected to generate 2.13 times less return on investment than Lollands Bank. But when comparing it to its historical volatility, Djurslands Bank is 1.96 times less risky than Lollands Bank. It trades about 0.04 of its potential returns per unit of risk. Lollands Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  65,000  in Lollands Bank on April 1, 2025 and sell it today you would earn a total of  2,500  from holding Lollands Bank or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Djurslands Bank  vs.  Lollands Bank

Djurslands Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Djurslands Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Djurslands Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lollands Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lollands Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Lollands Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Djurslands Bank and Lollands Bank

The main advantage of trading using opposite Djurslands Bank and Lollands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Djurslands Bank position performs unexpectedly, Lollands 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 Lollands Bank will offset losses from the drop in Lollands Bank's long position.

The idea behind Djurslands Bank and Lollands Bank 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.

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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 .