Correlation Between Sparebank and Commerzbank
Can any of the company-specific risk be diversified away by investing in both Sparebank and Commerzbank 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 Sparebank and Commerzbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and Commerzbank AG, you can compare the effects of market volatilities on Sparebank and Commerzbank 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 Sparebank with a short position of Commerzbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Commerzbank.
Diversification Opportunities for Sparebank and Commerzbank
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sparebank and Commerzbank is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG and Sparebank 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 Sparebank 1 SR are associated (or correlated) with Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of Sparebank i.e., Sparebank and Commerzbank go up and down completely randomly.
Pair Corralation between Sparebank and Commerzbank
Assuming the 90 days trading horizon Sparebank is expected to generate 1.79 times less return on investment than Commerzbank. But when comparing it to its historical volatility, Sparebank 1 SR is 1.46 times less risky than Commerzbank. It trades about 0.56 of its potential returns per unit of risk. Commerzbank AG is currently generating about 0.69 of returns per unit of risk over similar time horizon. If you would invest 1,578 in Commerzbank AG on November 4, 2024 and sell it today you would earn a total of 285.00 from holding Commerzbank AG or generate 18.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 SR vs. Commerzbank AG
Performance |
| Timeline |
| Sparebank 1 SR |
| Commerzbank AG |
Sparebank and Commerzbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Commerzbank
The main advantage of trading using opposite Sparebank and Commerzbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Commerzbank 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 Commerzbank will offset losses from the drop in Commerzbank's long position.| Sparebank vs. Fulcrum Metals PLC | Sparebank vs. Gear4music Plc | Sparebank vs. Adriatic Metals | Sparebank vs. GreenX Metals |
| Commerzbank vs. Sartorius Stedim Biotech | Commerzbank vs. Premier Foods PLC | Commerzbank vs. Take Two Interactive Software | Commerzbank vs. Polar Capital Technology |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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