Correlation Between SpareBank and Storebrand ASA
Can any of the company-specific risk be diversified away by investing in both SpareBank and Storebrand ASA 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 SpareBank and Storebrand ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SpareBank 1 stlandet and Storebrand ASA, you can compare the effects of market volatilities on SpareBank and Storebrand ASA 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 SpareBank with a short position of Storebrand ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SpareBank and Storebrand ASA.
Diversification Opportunities for SpareBank and Storebrand ASA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SpareBank and Storebrand is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SpareBank 1 stlandet and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA and 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 SpareBank 1 stlandet are associated (or correlated) with Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of SpareBank i.e., SpareBank and Storebrand ASA go up and down completely randomly.
Pair Corralation between SpareBank and Storebrand ASA
Assuming the 90 days trading horizon SpareBank 1 stlandet is expected to generate 1.03 times more return on investment than Storebrand ASA. However, SpareBank is 1.03 times more volatile than Storebrand ASA. It trades about -0.05 of its potential returns per unit of risk. Storebrand ASA is currently generating about -0.06 per unit of risk. If you would invest 15,438 in SpareBank 1 stlandet on August 24, 2024 and sell it today you would lose (292.00) from holding SpareBank 1 stlandet or give up 1.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SpareBank 1 stlandet vs. Storebrand ASA
Performance |
| Timeline |
| SpareBank 1 stlandet |
| Storebrand ASA |
SpareBank and Storebrand ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SpareBank and Storebrand ASA
The main advantage of trading using opposite SpareBank and Storebrand ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SpareBank position performs unexpectedly, Storebrand ASA 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 Storebrand ASA will offset losses from the drop in Storebrand ASA's long position.| SpareBank vs. Sparebank 1 SMN | SpareBank vs. Sparebank 1 Nord Norge | SpareBank vs. Sparebanken Vest | SpareBank vs. Sparebank 1 SR |
| Storebrand ASA vs. DnB ASA | Storebrand ASA vs. Gjensidige Forsikring ASA | Storebrand ASA vs. Orkla ASA | Storebrand ASA vs. Telenor 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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