Correlation Between Sparebank and Odfjell Technology
Can any of the company-specific risk be diversified away by investing in both Sparebank and Odfjell Technology 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 Odfjell Technology 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 Odfjell Technology, you can compare the effects of market volatilities on Sparebank and Odfjell Technology 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 Odfjell Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Odfjell Technology.
Diversification Opportunities for Sparebank and Odfjell Technology
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sparebank and Odfjell is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology 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 Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of Sparebank i.e., Sparebank and Odfjell Technology go up and down completely randomly.
Pair Corralation between Sparebank and Odfjell Technology
Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.37 times more return on investment than Odfjell Technology. However, Sparebank 1 SMN is 2.74 times less risky than Odfjell Technology. It trades about 0.04 of its potential returns per unit of risk. Odfjell Technology is currently generating about -0.09 per unit of risk. If you would invest 16,500 in Sparebank 1 SMN on August 28, 2024 and sell it today you would earn a total of 136.00 from holding Sparebank 1 SMN or generate 0.82% 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. Odfjell Technology
Performance |
| Timeline |
| Sparebank 1 SMN |
| Odfjell Technology |
Sparebank and Odfjell Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Odfjell Technology
The main advantage of trading using opposite Sparebank and Odfjell Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Odfjell Technology 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 Odfjell Technology will offset losses from the drop in Odfjell Technology's long position.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
| Odfjell Technology vs. BW Offshore | Odfjell Technology vs. Elkem ASA | Odfjell Technology vs. Solstad Offsho | Odfjell Technology vs. Arcticzymes Technologies 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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