Correlation Between Sparebank and Sparebank
Can any of the company-specific risk be diversified away by investing in both Sparebank and 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 Sparebank and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 Nord Norge and Sparebank 1 SMN, you can compare the effects of market volatilities on Sparebank and 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 Sparebank with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Sparebank.
Diversification Opportunities for Sparebank and Sparebank
Almost no diversification
The 3 months correlation between Sparebank and Sparebank is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 Nord Norge and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN 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 Nord Norge are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SMN has no effect on the direction of Sparebank i.e., Sparebank and Sparebank go up and down completely randomly.
Pair Corralation between Sparebank and Sparebank
Assuming the 90 days trading horizon Sparebank 1 Nord Norge is expected to under-perform the Sparebank. But the stock apears to be less risky and, when comparing its historical volatility, Sparebank 1 Nord Norge is 1.26 times less risky than Sparebank. The stock trades about -0.04 of its potential returns per unit of risk. The Sparebank 1 SMN is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 Nord Norge vs. Sparebank 1 SMN
Performance |
| Timeline |
| Sparebank 1 Nord |
| Sparebank 1 SMN |
Sparebank and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Sparebank
The main advantage of trading using opposite Sparebank and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, 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 Sparebank will offset losses from the drop in Sparebank's long position.The idea behind Sparebank 1 Nord Norge and Sparebank 1 SMN 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.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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