Correlation Between Sparebank and Otello ASA
Can any of the company-specific risk be diversified away by investing in both Sparebank and Otello 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 Otello ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 Ringerike and Otello ASA, you can compare the effects of market volatilities on Sparebank and Otello 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 Otello ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Otello ASA.
Diversification Opportunities for Sparebank and Otello ASA
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sparebank and Otello is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 Ringerike and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello 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 Ringerike are associated (or correlated) with Otello ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of Sparebank i.e., Sparebank and Otello ASA go up and down completely randomly.
Pair Corralation between Sparebank and Otello ASA
Assuming the 90 days trading horizon Sparebank is expected to generate 1.8 times less return on investment than Otello ASA. But when comparing it to its historical volatility, Sparebank 1 Ringerike is 1.82 times less risky than Otello ASA. It trades about 0.02 of its potential returns per unit of risk. Otello ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 796.00 in Otello ASA on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Otello ASA or generate 0.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sparebank 1 Ringerike vs. Otello ASA
Performance |
| Timeline |
| Sparebank 1 Ringerike |
| Otello ASA |
Sparebank and Otello ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Otello ASA
The main advantage of trading using opposite Sparebank and Otello ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Otello 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 Otello ASA will offset losses from the drop in Otello ASA's long position.The idea behind Sparebank 1 Ringerike and Otello ASA 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.| Otello ASA vs. Kid ASA | Otello ASA vs. Selvaag Bolig ASA | Otello ASA vs. Wallenius Wilhelmsen Logistics | Otello ASA vs. Elkem 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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