Correlation Between Skue Sparebank and Romsdal Sparebank
Can any of the company-specific risk be diversified away by investing in both Skue Sparebank 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 Skue Sparebank and Romsdal 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 Romsdal Sparebank, you can compare the effects of market volatilities on Skue Sparebank 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 Skue Sparebank with a short position of Romsdal Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skue Sparebank and Romsdal Sparebank.
Diversification Opportunities for Skue Sparebank and Romsdal Sparebank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Skue and Romsdal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank and Romsdal Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romsdal Sparebank 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 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 Skue Sparebank i.e., Skue Sparebank and Romsdal Sparebank go up and down completely randomly.
Pair Corralation between Skue Sparebank and Romsdal Sparebank
Assuming the 90 days trading horizon Skue Sparebank is expected to generate 1.8 times less return on investment than Romsdal Sparebank. In addition to that, Skue Sparebank is 1.68 times more volatile than Romsdal Sparebank. It trades about 0.08 of its total potential returns per unit of risk. Romsdal Sparebank is currently generating about 0.25 per unit of volatility. If you would invest 11,590 in Romsdal Sparebank on August 29, 2024 and sell it today you would earn a total of 806.00 from holding Romsdal Sparebank or generate 6.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Skue Sparebank vs. Romsdal Sparebank
Performance |
| Timeline |
| Skue Sparebank |
| Romsdal Sparebank |
Skue Sparebank and Romsdal Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skue Sparebank and Romsdal Sparebank
The main advantage of trading using opposite Skue Sparebank and Romsdal Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skue Sparebank 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.| Skue Sparebank vs. Melhus Sparebank | Skue Sparebank vs. Sparebanken Ost | Skue Sparebank vs. Sparebanken Sor |
| Romsdal Sparebank vs. Elkem ASA | Romsdal Sparebank vs. DNB NOR KAPFORV | Romsdal Sparebank vs. Integrated Wind Solutions | Romsdal Sparebank vs. Vow 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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