Correlation Between Romerike Sparebank and Sparebanken Ost

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Can any of the company-specific risk be diversified away by investing in both Romerike Sparebank and Sparebanken Ost 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 Romerike Sparebank and Sparebanken Ost into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Romerike Sparebank and Sparebanken Ost, you can compare the effects of market volatilities on Romerike Sparebank and Sparebanken Ost 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 Romerike Sparebank with a short position of Sparebanken Ost. Check out your portfolio center. Please also check ongoing floating volatility patterns of Romerike Sparebank and Sparebanken Ost.

Diversification Opportunities for Romerike Sparebank and Sparebanken Ost

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Romerike and Sparebanken is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Romerike Sparebank and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost and Romerike 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 Romerike Sparebank are associated (or correlated) with Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Romerike Sparebank i.e., Romerike Sparebank and Sparebanken Ost go up and down completely randomly.

Pair Corralation between Romerike Sparebank and Sparebanken Ost

Assuming the 90 days trading horizon Romerike Sparebank is expected to generate 0.64 times more return on investment than Sparebanken Ost. However, Romerike Sparebank is 1.56 times less risky than Sparebanken Ost. It trades about 0.28 of its potential returns per unit of risk. Sparebanken Ost is currently generating about 0.09 per unit of risk. If you would invest  12,400  in Romerike Sparebank on September 5, 2024 and sell it today you would earn a total of  850.00  from holding Romerike Sparebank or generate 6.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Romerike Sparebank  vs.  Sparebanken Ost

 Performance 
       Timeline  
Romerike Sparebank 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Romerike Sparebank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Romerike Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Sparebanken Ost 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Romerike Sparebank and Sparebanken Ost Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Romerike Sparebank and Sparebanken Ost

The main advantage of trading using opposite Romerike Sparebank and Sparebanken Ost positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Romerike Sparebank position performs unexpectedly, Sparebanken Ost 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 Sparebanken Ost will offset losses from the drop in Sparebanken Ost's long position.
The idea behind Romerike Sparebank and Sparebanken Ost 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.
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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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