Correlation Between Spar Nord and TORM Plc
Can any of the company-specific risk be diversified away by investing in both Spar Nord and TORM Plc 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 TORM Plc 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 TORM plc, you can compare the effects of market volatilities on Spar Nord and TORM Plc 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 TORM Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spar Nord and TORM Plc.
Diversification Opportunities for Spar Nord and TORM Plc
Excellent diversification
The 3 months correlation between Spar and TORM is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and TORM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TORM plc 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 TORM Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TORM plc has no effect on the direction of Spar Nord i.e., Spar Nord and TORM Plc go up and down completely randomly.
Pair Corralation between Spar Nord and TORM Plc
Assuming the 90 days trading horizon Spar Nord Bank is expected to generate 0.79 times more return on investment than TORM Plc. However, Spar Nord Bank is 1.27 times less risky than TORM Plc. It trades about -0.07 of its potential returns per unit of risk. TORM plc is currently generating about -0.39 per unit of risk. If you would invest 14,000 in Spar Nord Bank on August 25, 2024 and sell it today you would lose (360.00) from holding Spar Nord Bank or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Spar Nord Bank vs. TORM plc
Performance |
| Timeline |
| Spar Nord Bank |
| TORM plc |
Spar Nord and TORM Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spar Nord and TORM Plc
The main advantage of trading using opposite Spar Nord and TORM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spar Nord position performs unexpectedly, TORM Plc 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 TORM Plc will offset losses from the drop in TORM Plc's long position.| Spar Nord vs. Dataproces Group AS | Spar Nord vs. cBrain AS | Spar Nord vs. ALK Abell AS | Spar Nord vs. ChemoMetec AS |
| TORM Plc vs. Danske Bank AS | TORM Plc vs. DSV Panalpina AS | TORM Plc vs. AP Mller | TORM Plc vs. Vestas Wind Systems |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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