Correlation Between CVR Energy and Sparebank

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

By analyzing existing cross correlation between CVR Energy and Sparebank 1 SR, you can compare the effects of market volatilities on CVR Energy 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 CVR Energy with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and Sparebank.

Diversification Opportunities for CVR Energy and Sparebank

0.24

Correlation Coefficient

CVR Energy  Sparebank

Modest diversification

The 3 months correlation between CVR and Sparebank is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and CVR Energy 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 CVR Energy 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 SR has no effect on the direction of CVR Energy i.e., CVR Energy and Sparebank go up and down completely randomly.

Pair Corralation between CVR Energy and Sparebank

Assuming the 90 days trading horizon CVR Energy is expected to generate 2.05 times less return on investment than Sparebank. In addition to that, CVR Energy is 3.19 times more volatile than Sparebank 1 SR. It trades about 0.03 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.2 per unit of volatility. If you would invest  14,480  in Sparebank 1 SR on November 29, 2024 and sell it today you would earn a total of  1,640  from holding Sparebank 1 SR or generate 11.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

CVR Energy  vs.  Sparebank 1 SR

CVR Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CVR Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sparebank 1 SR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with CVR Energy and Sparebank

The main advantage of trading using opposite CVR Energy and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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.

The idea behind CVR Energy and Sparebank 1 SR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.