Correlation Between Sparebanken Mre and Melhus Sparebank
Can any of the company-specific risk be diversified away by investing in both Sparebanken Mre and Melhus 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 Sparebanken Mre and Melhus Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebanken Mre and Melhus Sparebank, you can compare the effects of market volatilities on Sparebanken Mre and Melhus 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 Sparebanken Mre with a short position of Melhus Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebanken Mre and Melhus Sparebank.
Diversification Opportunities for Sparebanken Mre and Melhus Sparebank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sparebanken and Melhus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Mre and Melhus Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melhus Sparebank and Sparebanken Mre 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 Sparebanken Mre are associated (or correlated) with Melhus Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melhus Sparebank has no effect on the direction of Sparebanken Mre i.e., Sparebanken Mre and Melhus Sparebank go up and down completely randomly.
Pair Corralation between Sparebanken Mre and Melhus Sparebank
Assuming the 90 days trading horizon Sparebanken Mre is expected to generate 1.56 times more return on investment than Melhus Sparebank. However, Sparebanken Mre is 1.56 times more volatile than Melhus Sparebank. It trades about 0.14 of its potential returns per unit of risk. Melhus Sparebank is currently generating about 0.07 per unit of risk. If you would invest 8,465 in Sparebanken Mre on August 28, 2024 and sell it today you would earn a total of 825.00 from holding Sparebanken Mre or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebanken Mre vs. Melhus Sparebank
Performance |
| Timeline |
| Sparebanken Mre |
| Melhus Sparebank |
Sparebanken Mre and Melhus Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebanken Mre and Melhus Sparebank
The main advantage of trading using opposite Sparebanken Mre and Melhus Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebanken Mre position performs unexpectedly, Melhus 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 Melhus Sparebank will offset losses from the drop in Melhus Sparebank's long position.| Sparebanken Mre vs. DnB ASA | Sparebanken Mre vs. Sparebank 1 SR | Sparebanken Mre vs. Sparebank 1 SMN | Sparebanken Mre vs. Sparebank 1 Ostfold |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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