Correlation Between Sparebank and River
Can any of the company-specific risk be diversified away by investing in both Sparebank and River 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 River 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 River and Mercantile, you can compare the effects of market volatilities on Sparebank and River 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 River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and River.
Diversification Opportunities for Sparebank and River
Very good diversification
The 3 months correlation between Sparebank and River is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and River and Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River and Mercantile 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 River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River and Mercantile has no effect on the direction of Sparebank i.e., Sparebank and River go up and down completely randomly.
Pair Corralation between Sparebank and River
Assuming the 90 days trading horizon Sparebank 1 SR is expected to under-perform the River. In addition to that, Sparebank is 1.12 times more volatile than River and Mercantile. It trades about -0.02 of its total potential returns per unit of risk. River and Mercantile is currently generating about 0.14 per unit of volatility. If you would invest 17,300 in River and Mercantile on August 31, 2024 and sell it today you would earn a total of 650.00 from holding River and Mercantile or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 SR vs. River and Mercantile
Performance |
| Timeline |
| Sparebank 1 SR |
| River and Mercantile |
Sparebank and River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and River
The main advantage of trading using opposite Sparebank and River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, River 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 River will offset losses from the drop in River's long position.| Sparebank vs. Neometals | Sparebank vs. Coor Service Management | Sparebank vs. Aeorema Communications Plc | Sparebank vs. JLEN Environmental Assets |
| River vs. Orient Telecoms | River vs. Spirent Communications plc | River vs. Ironveld Plc | River vs. Universal Music Group |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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