Correlation Between UNIQA Insurance and Sparebanken Vest

Can any of the company-specific risk be diversified away by investing in both UNIQA Insurance and Sparebanken Vest 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 UNIQA Insurance and Sparebanken Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UNIQA Insurance Group and Sparebanken Vest, you can compare the effects of market volatilities on UNIQA Insurance and Sparebanken Vest 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 UNIQA Insurance with a short position of Sparebanken Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIQA Insurance and Sparebanken Vest.

Diversification Opportunities for UNIQA Insurance and Sparebanken Vest

0.45

Correlation Coefficient

UNIQA Insurance  Sparebanken Vest

Very weak diversification

The 3 months correlation between UNIQA and Sparebanken is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding UNIQA Insurance Group and Sparebanken Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Vest and UNIQA Insurance 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 UNIQA Insurance Group are associated (or correlated) with Sparebanken Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Vest has no effect on the direction of UNIQA Insurance i.e., UNIQA Insurance and Sparebanken Vest go up and down completely randomly.

Pair Corralation between UNIQA Insurance and Sparebanken Vest

Assuming the 90 days trading horizon UNIQA Insurance is expected to generate 3.4 times less return on investment than Sparebanken Vest. But when comparing it to its historical volatility, UNIQA Insurance Group is 1.91 times less risky than Sparebanken Vest. It trades about 0.05 of its potential returns per unit of risk. Sparebanken Vest is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,037  in Sparebanken Vest on October 11, 2024 and sell it today you would earn a total of  6,143  from holding Sparebanken Vest or generate 76.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.57%
Values	Daily Returns

UNIQA Insurance Group  vs.  Sparebanken Vest

UNIQA Insurance Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNIQA Insurance Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, UNIQA Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sparebanken Vest

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Vest are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebanken Vest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIQA Insurance and Sparebanken Vest

The main advantage of trading using opposite UNIQA Insurance and Sparebanken Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIQA Insurance position performs unexpectedly, Sparebanken Vest 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 Sparebanken Vest will offset losses from the drop in Sparebanken Vest's long position.

The idea behind UNIQA Insurance Group and Sparebanken Vest pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.