Correlation Between Sparebank and Orkla ASA
Can any of the company-specific risk be diversified away by investing in both Sparebank and Orkla ASA 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 Orkla ASA 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 Orkla ASA, you can compare the effects of market volatilities on Sparebank and Orkla ASA 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 Orkla ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Orkla ASA.
Diversification Opportunities for Sparebank and Orkla ASA
Significant diversification
The 3 months correlation between Sparebank and Orkla is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Orkla ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orkla 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 Orkla ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orkla ASA has no effect on the direction of Sparebank i.e., Sparebank and Orkla ASA go up and down completely randomly.
Pair Corralation between Sparebank and Orkla ASA
Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.81 times more return on investment than Orkla ASA. However, Sparebank 1 SMN is 1.23 times less risky than Orkla ASA. It trades about 0.19 of its potential returns per unit of risk. Orkla ASA is currently generating about 0.11 per unit of risk. If you would invest 15,454 in Sparebank 1 SMN on November 2, 2024 and sell it today you would earn a total of 2,804 from holding Sparebank 1 SMN or generate 18.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 SMN vs. Orkla ASA
Performance |
| Timeline |
| Sparebank 1 SMN |
| Orkla ASA |
Sparebank and Orkla ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Orkla ASA
The main advantage of trading using opposite Sparebank and Orkla ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Orkla ASA 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 Orkla ASA will offset losses from the drop in Orkla ASA's long position.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
| Orkla ASA vs. Telenor ASA | Orkla ASA vs. DnB ASA | Orkla ASA vs. Yara International ASA | Orkla ASA vs. Storebrand 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 Stocks Directory module to find actively traded stocks across global markets.
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