Correlation Between Spar Nord and FLSmidth
Can any of the company-specific risk be diversified away by investing in both Spar Nord and FLSmidth 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 Spar Nord and FLSmidth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spar Nord Bank and FLSmidth Co, you can compare the effects of market volatilities on Spar Nord and FLSmidth 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 Spar Nord with a short position of FLSmidth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spar Nord and FLSmidth.
Diversification Opportunities for Spar Nord and FLSmidth
Very weak diversification
The 3 months correlation between Spar and FLSmidth is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and Spar Nord 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 Spar Nord Bank are associated (or correlated) with FLSmidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLSmidth has no effect on the direction of Spar Nord i.e., Spar Nord and FLSmidth go up and down completely randomly.
Pair Corralation between Spar Nord and FLSmidth
Assuming the 90 days trading horizon Spar Nord is expected to generate 1.41 times less return on investment than FLSmidth. But when comparing it to its historical volatility, Spar Nord Bank is 1.1 times less risky than FLSmidth. It trades about 0.2 of its potential returns per unit of risk. FLSmidth Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 35,740 in FLSmidth Co on September 1, 2024 and sell it today you would earn a total of 2,780 from holding FLSmidth Co or generate 7.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spar Nord Bank vs. FLSmidth Co
Performance |
| Timeline |
| Spar Nord Bank |
| FLSmidth |
Spar Nord and FLSmidth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spar Nord and FLSmidth
The main advantage of trading using opposite Spar Nord and FLSmidth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spar Nord position performs unexpectedly, FLSmidth 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 FLSmidth will offset losses from the drop in FLSmidth's long position.| Spar Nord vs. Sydbank AS | Spar Nord vs. Jyske Bank AS | Spar Nord vs. Alm Brand | Spar Nord vs. Nordea Bank Abp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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