Correlation Between Ford and Sparebank
Can any of the company-specific risk be diversified away by investing in both Ford and Sparebank 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 Ford and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Sparebank 1 SMN, you can compare the effects of market volatilities on Ford and Sparebank 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 Ford with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sparebank.
Diversification Opportunities for Ford and Sparebank
Excellent diversification
The 3 months correlation between Ford and Sparebank is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Ford 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 Ford Motor are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SMN has no effect on the direction of Ford i.e., Ford and Sparebank go up and down completely randomly.
Pair Corralation between Ford and Sparebank
Taking into account the 90-day investment horizon Ford is expected to generate 4.77 times less return on investment than Sparebank. In addition to that, Ford is 1.71 times more volatile than Sparebank 1 SMN. It trades about 0.06 of its total potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.49 per unit of volatility. If you would invest 16,838 in Sparebank 1 SMN on October 24, 2024 and sell it today you would earn a total of 1,066 from holding Sparebank 1 SMN or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 89.47% |
| Values | Daily Returns |
Ford Motor vs. Sparebank 1 SMN
Performance |
| Timeline |
| Ford Motor |
| Sparebank 1 SMN |
Ford and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Sparebank
The main advantage of trading using opposite Ford and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.The idea behind Ford Motor and Sparebank 1 SMN 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.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
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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