Correlation Between Skue Sparebank and North Energy

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

Diversification Opportunities for Skue Sparebank and North Energy

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Skue and North is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy ASA 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 North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Skue Sparebank i.e., Skue Sparebank and North Energy go up and down completely randomly.

Pair Corralation between Skue Sparebank and North Energy

Assuming the 90 days trading horizon Skue Sparebank is expected to generate 0.72 times more return on investment than North Energy. However, Skue Sparebank is 1.39 times less risky than North Energy. It trades about 0.13 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.07 per unit of risk. If you would invest  25,050  in Skue Sparebank on September 3, 2024 and sell it today you would earn a total of  850.00  from holding Skue Sparebank or generate 3.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Skue Sparebank  vs.  North Energy ASA

 Performance 
       Timeline  
Skue Sparebank 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Skue Sparebank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Skue Sparebank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
North Energy ASA 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in North Energy ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, North Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Skue Sparebank and North Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Skue Sparebank and North Energy

The main advantage of trading using opposite Skue Sparebank and North Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skue Sparebank position performs unexpectedly, North Energy 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 North Energy will offset losses from the drop in North Energy's long position.
The idea behind Skue Sparebank and North Energy 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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