Correlation Between Sparebanken Sor and Melhus Sparebank
Can any of the company-specific risk be diversified away by investing in both Sparebanken Sor and Melhus 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 Sparebanken Sor and Melhus Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebanken Sor and Melhus Sparebank, you can compare the effects of market volatilities on Sparebanken Sor and Melhus 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 Sparebanken Sor with a short position of Melhus Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebanken Sor and Melhus Sparebank.
Diversification Opportunities for Sparebanken Sor and Melhus Sparebank
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sparebanken and Melhus is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Sor and Melhus Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melhus Sparebank and Sparebanken Sor 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 Sparebanken Sor are associated (or correlated) with Melhus Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melhus Sparebank has no effect on the direction of Sparebanken Sor i.e., Sparebanken Sor and Melhus Sparebank go up and down completely randomly.
Pair Corralation between Sparebanken Sor and Melhus Sparebank
Assuming the 90 days trading horizon Sparebanken Sor is expected to generate 1.27 times more return on investment than Melhus Sparebank. However, Sparebanken Sor is 1.27 times more volatile than Melhus Sparebank. It trades about 0.09 of its potential returns per unit of risk. Melhus Sparebank is currently generating about 0.04 per unit of risk. If you would invest 11,045 in Sparebanken Sor on August 29, 2024 and sell it today you would earn a total of 7,905 from holding Sparebanken Sor or generate 71.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebanken Sor vs. Melhus Sparebank
Performance |
| Timeline |
| Sparebanken Sor |
| Melhus Sparebank |
Sparebanken Sor and Melhus Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebanken Sor and Melhus Sparebank
The main advantage of trading using opposite Sparebanken Sor and Melhus Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebanken Sor position performs unexpectedly, Melhus 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 Melhus Sparebank will offset losses from the drop in Melhus Sparebank's long position.| Sparebanken Sor vs. Sparebanken Vest | Sparebanken Sor vs. Sparebank 1 Nord Norge | Sparebanken Sor vs. Sparebank 1 SMN | Sparebanken Sor vs. Sparebanken Ost |
| Melhus Sparebank vs. Sparebank 1 Nord Norge | Melhus Sparebank vs. Aurskog Sparebank | Melhus Sparebank vs. Helgeland Sparebank |
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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