Correlation Between Sparebank and EAM Solar
Can any of the company-specific risk be diversified away by investing in both Sparebank and EAM Solar 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 EAM Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SMN and EAM Solar ASA, you can compare the effects of market volatilities on Sparebank and EAM Solar 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 EAM Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and EAM Solar.
Diversification Opportunities for Sparebank and EAM Solar
Very good diversification
The 3 months correlation between Sparebank and EAM is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and EAM Solar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAM Solar ASA 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 SMN are associated (or correlated) with EAM Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAM Solar ASA has no effect on the direction of Sparebank i.e., Sparebank and EAM Solar go up and down completely randomly.
Pair Corralation between Sparebank and EAM Solar
Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.05 times more return on investment than EAM Solar. However, Sparebank 1 SMN is 22.19 times less risky than EAM Solar. It trades about 0.2 of its potential returns per unit of risk. EAM Solar ASA is currently generating about -0.06 per unit of risk. If you would invest 16,400 in Sparebank 1 SMN on November 2, 2024 and sell it today you would earn a total of 1,858 from holding Sparebank 1 SMN or generate 11.33% 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 SMN vs. EAM Solar ASA
Performance |
| Timeline |
| Sparebank 1 SMN |
| EAM Solar ASA |
Sparebank and EAM Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and EAM Solar
The main advantage of trading using opposite Sparebank and EAM Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, EAM Solar 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 EAM Solar will offset losses from the drop in EAM Solar's long position.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
| EAM Solar vs. NorAm Drilling AS | EAM Solar vs. Dolphin Drilling AS | EAM Solar vs. Nordic Semiconductor ASA | EAM Solar vs. Bien Sparebank 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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