Correlation Between Orkla ASA and Sparebank
Can any of the company-specific risk be diversified away by investing in both Orkla ASA 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 Orkla ASA and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orkla ASA and Sparebank 1 SR, you can compare the effects of market volatilities on Orkla ASA 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 Orkla ASA with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orkla ASA and Sparebank.
Diversification Opportunities for Orkla ASA and Sparebank
Very weak diversification
The 3 months correlation between Orkla and Sparebank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and Orkla ASA 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 Orkla ASA 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 SR has no effect on the direction of Orkla ASA i.e., Orkla ASA and Sparebank go up and down completely randomly.
Pair Corralation between Orkla ASA and Sparebank
Assuming the 90 days trading horizon Orkla ASA is expected to generate 1.09 times less return on investment than Sparebank. But when comparing it to its historical volatility, Orkla ASA is 1.15 times less risky than Sparebank. It trades about 0.1 of its potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 13,440 in Sparebank 1 SR on September 2, 2024 and sell it today you would earn a total of 1,000.00 from holding Sparebank 1 SR or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orkla ASA vs. Sparebank 1 SR
Performance |
| Timeline |
| Orkla ASA |
| Sparebank 1 SR |
Orkla ASA and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orkla ASA and Sparebank
The main advantage of trading using opposite Orkla ASA and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA 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 Orkla ASA and Sparebank 1 SR 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. DnB ASA | Sparebank vs. Gjensidige Forsikring ASA | Sparebank vs. Orkla ASA | Sparebank vs. Telenor 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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