Correlation Between Vow ASA and Sparebank
Can any of the company-specific risk be diversified away by investing in both Vow ASA and 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 Vow ASA and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vow ASA and Sparebank 1 SMN, you can compare the effects of market volatilities on Vow ASA and 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 Vow ASA with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vow ASA and Sparebank.
Diversification Opportunities for Vow ASA and Sparebank
Good diversification
The 3 months correlation between Vow and Sparebank is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Vow ASA 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 Vow ASA are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SMN has no effect on the direction of Vow ASA i.e., Vow ASA and Sparebank go up and down completely randomly.
Pair Corralation between Vow ASA and Sparebank
Assuming the 90 days trading horizon Vow ASA is expected to under-perform the Sparebank. In addition to that, Vow ASA is 7.36 times more volatile than Sparebank 1 SMN. It trades about -0.16 of its total potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.18 per unit of volatility. If you would invest 15,262 in Sparebank 1 SMN on August 28, 2024 and sell it today you would earn a total of 1,108 from holding Sparebank 1 SMN or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vow ASA vs. Sparebank 1 SMN
Performance |
| Timeline |
| Vow ASA |
| Sparebank 1 SMN |
Vow ASA and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vow ASA and Sparebank
The main advantage of trading using opposite Vow ASA and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vow ASA position performs unexpectedly, 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 Sparebank will offset losses from the drop in Sparebank's long position.| Vow ASA vs. Arctic Bioscience AS | Vow ASA vs. ADS Maritime Holding | Vow ASA vs. Arctic Fish Holding | Vow ASA vs. Instabank ASA |
| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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