Correlation Between Scatec Solar and Romsdal Sparebank
Can any of the company-specific risk be diversified away by investing in both Scatec Solar and Romsdal 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 Scatec Solar and Romsdal Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scatec Solar OL and Romsdal Sparebank, you can compare the effects of market volatilities on Scatec Solar and Romsdal 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 Scatec Solar with a short position of Romsdal Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scatec Solar and Romsdal Sparebank.
Diversification Opportunities for Scatec Solar and Romsdal Sparebank
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Scatec and Romsdal is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Scatec Solar OL and Romsdal Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romsdal Sparebank and Scatec Solar 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 Scatec Solar OL are associated (or correlated) with Romsdal Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romsdal Sparebank has no effect on the direction of Scatec Solar i.e., Scatec Solar and Romsdal Sparebank go up and down completely randomly.
Pair Corralation between Scatec Solar and Romsdal Sparebank
Assuming the 90 days trading horizon Scatec Solar OL is expected to generate 2.08 times more return on investment than Romsdal Sparebank. However, Scatec Solar is 2.08 times more volatile than Romsdal Sparebank. It trades about 0.02 of its potential returns per unit of risk. Romsdal Sparebank is currently generating about 0.02 per unit of risk. If you would invest 7,736 in Scatec Solar OL on September 14, 2024 and sell it today you would earn a total of 389.00 from holding Scatec Solar OL or generate 5.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scatec Solar OL vs. Romsdal Sparebank
Performance |
| Timeline |
| Scatec Solar OL |
| Romsdal Sparebank |
Scatec Solar and Romsdal Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scatec Solar and Romsdal Sparebank
The main advantage of trading using opposite Scatec Solar and Romsdal Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scatec Solar position performs unexpectedly, Romsdal 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 Romsdal Sparebank will offset losses from the drop in Romsdal Sparebank's long position.The idea behind Scatec Solar OL and Romsdal Sparebank 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.| Romsdal Sparebank vs. Eidesvik Offshore ASA | Romsdal Sparebank vs. SD Standard Drilling | Romsdal Sparebank vs. Clean Seas Seafood | Romsdal Sparebank vs. Vow Green Metals |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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