Correlation Between First and Sparebank
Can any of the company-specific risk be diversified away by investing in both First 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 First and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and Sparebank 1 SR, you can compare the effects of market volatilities on First 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 First with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Sparebank.
Diversification Opportunities for First and Sparebank
Excellent diversification
The 3 months correlation between First and Sparebank is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and First 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 First Class Metals 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 SR has no effect on the direction of First i.e., First and Sparebank go up and down completely randomly.
Pair Corralation between First and Sparebank
Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Sparebank. In addition to that, First is 3.76 times more volatile than Sparebank 1 SR. It trades about -0.19 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.21 per unit of volatility. If you would invest 14,480 in Sparebank 1 SR on October 30, 2024 and sell it today you would earn a total of 1,060 from holding Sparebank 1 SR or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Class Metals vs. Sparebank 1 SR
Performance |
| Timeline |
| First Class Metals |
| Sparebank 1 SR |
First and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and Sparebank
The main advantage of trading using opposite First and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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.| First vs. MediaZest plc | First vs. AcadeMedia AB | First vs. Centaur Media | First vs. Southwest Airlines Co |
| Sparebank vs. Wheaton Precious Metals | Sparebank vs. Indutrade AB | Sparebank vs. Fulcrum Metals PLC | Sparebank vs. Flow Traders NV |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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