Correlation Between Sparebank and Elmos Semiconductor

Can any of the company-specific risk be diversified away by investing in both Sparebank and Elmos Semiconductor 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 Elmos Semiconductor 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 Elmos Semiconductor SE, you can compare the effects of market volatilities on Sparebank and Elmos Semiconductor 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 Elmos Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Elmos Semiconductor.

Diversification Opportunities for Sparebank and Elmos Semiconductor

-0.54

Correlation Coefficient

Sparebank  Elmos Semiconductor

Excellent diversification

The 3 months correlation between Sparebank and Elmos is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Sparebank i.e., Sparebank and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Sparebank and Elmos Semiconductor

Assuming the 90 days trading horizon Sparebank 1 SR is expected to generate 0.3 times more return on investment than Elmos Semiconductor. However, Sparebank 1 SR is 3.32 times less risky than Elmos Semiconductor. It trades about 0.25 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about -0.05 per unit of risk. If you would invest  14,672  in Sparebank 1 SR on December 29, 2024 and sell it today you would earn a total of  2,288  from holding Sparebank 1 SR or generate 15.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sparebank 1 SR  vs.  Elmos Semiconductor SE

Sparebank 1 SR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elmos Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elmos Semiconductor SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sparebank and Elmos Semiconductor

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

The idea behind Sparebank 1 SR and Elmos Semiconductor SE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.