Correlation Between Skue Sparebank and Sparebank
Can any of the company-specific risk be diversified away by investing in both Skue 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 Skue Sparebank and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skue Sparebank and Sparebank 1 SMN, you can compare the effects of market volatilities on Skue 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 Skue Sparebank with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skue Sparebank and Sparebank.
Diversification Opportunities for Skue Sparebank and Sparebank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Skue and Sparebank is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank 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 Skue 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 Skue Sparebank 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 Skue Sparebank i.e., Skue Sparebank and Sparebank go up and down completely randomly.
Pair Corralation between Skue Sparebank and Sparebank
Assuming the 90 days trading horizon Skue Sparebank is expected to generate 1.21 times more return on investment than Sparebank. However, Skue Sparebank is 1.21 times more volatile than Sparebank 1 SMN. It trades about 0.04 of its potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.04 per unit of risk. If you would invest 25,300 in Skue Sparebank on August 28, 2024 and sell it today you would earn a total of 200.00 from holding Skue Sparebank or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skue Sparebank vs. Sparebank 1 SMN
Performance |
| Timeline |
| Skue Sparebank |
| Sparebank 1 SMN |
Skue Sparebank and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skue Sparebank and Sparebank
The main advantage of trading using opposite Skue Sparebank and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skue 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 Skue Sparebank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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