Correlation Between Sparebank and Kraft Bank
Can any of the company-specific risk be diversified away by investing in both Sparebank and Kraft Bank 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 Kraft Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and Kraft Bank Asa, you can compare the effects of market volatilities on Sparebank and Kraft Bank 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 Kraft Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Kraft Bank.
Diversification Opportunities for Sparebank and Kraft Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sparebank and Kraft is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Kraft Bank Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Bank 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 SR are associated (or correlated) with Kraft Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Bank Asa has no effect on the direction of Sparebank i.e., Sparebank and Kraft Bank go up and down completely randomly.
Pair Corralation between Sparebank and Kraft Bank
Assuming the 90 days trading horizon Sparebank 1 SR is expected to generate 0.57 times more return on investment than Kraft Bank. However, Sparebank 1 SR is 1.76 times less risky than Kraft Bank. It trades about 0.07 of its potential returns per unit of risk. Kraft Bank Asa is currently generating about 0.03 per unit of risk. If you would invest 11,330 in Sparebank 1 SR on August 25, 2024 and sell it today you would earn a total of 2,870 from holding Sparebank 1 SR or generate 25.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Sparebank 1 SR vs. Kraft Bank Asa
Performance |
| Timeline |
| Sparebank 1 SR |
| Kraft Bank Asa |
Sparebank and Kraft Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Kraft Bank
The main advantage of trading using opposite Sparebank and Kraft Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Kraft Bank 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 Kraft Bank will offset losses from the drop in Kraft Bank's long position.| Sparebank vs. Sparebank 1 SMN | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA | Sparebank vs. Sparebank 1 Nord Norge |
| Kraft Bank vs. DnB ASA | Kraft Bank vs. Sparebank 1 SR | Kraft Bank vs. Sparebank 1 SMN | Kraft Bank vs. Sparebanken Mre |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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