Correlation Between Grieg Seafood and Romsdal Sparebank
Can any of the company-specific risk be diversified away by investing in both Grieg Seafood and Romsdal 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 Grieg Seafood and Romsdal Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grieg Seafood ASA and Romsdal Sparebank, you can compare the effects of market volatilities on Grieg Seafood and Romsdal 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 Grieg Seafood with a short position of Romsdal Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grieg Seafood and Romsdal Sparebank.
Diversification Opportunities for Grieg Seafood and Romsdal Sparebank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grieg and Romsdal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Grieg Seafood ASA and Romsdal Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romsdal Sparebank and Grieg Seafood 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 Grieg Seafood ASA are associated (or correlated) with Romsdal Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romsdal Sparebank has no effect on the direction of Grieg Seafood i.e., Grieg Seafood and Romsdal Sparebank go up and down completely randomly.
Pair Corralation between Grieg Seafood and Romsdal Sparebank
Assuming the 90 days trading horizon Grieg Seafood ASA is expected to generate 2.86 times more return on investment than Romsdal Sparebank. However, Grieg Seafood is 2.86 times more volatile than Romsdal Sparebank. It trades about 0.03 of its potential returns per unit of risk. Romsdal Sparebank is currently generating about -0.02 per unit of risk. If you would invest 6,500 in Grieg Seafood ASA on September 15, 2024 and sell it today you would earn a total of 65.00 from holding Grieg Seafood ASA or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grieg Seafood ASA vs. Romsdal Sparebank
Performance |
| Timeline |
| Grieg Seafood ASA |
| Romsdal Sparebank |
Grieg Seafood and Romsdal Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grieg Seafood and Romsdal Sparebank
The main advantage of trading using opposite Grieg Seafood and Romsdal Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grieg Seafood position performs unexpectedly, Romsdal 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 Romsdal Sparebank will offset losses from the drop in Romsdal Sparebank's long position.The idea behind Grieg Seafood ASA and Romsdal Sparebank 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.| Romsdal Sparebank vs. Odfjell Drilling | Romsdal Sparebank vs. Lery Seafood Group | Romsdal Sparebank vs. Awilco Drilling PLC | Romsdal Sparebank vs. Grieg Seafood 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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