Correlation Between Sparebank and Polar Capital

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

Diversification Opportunities for Sparebank and Polar Capital

0.73

Correlation Coefficient

Sparebank  Polar Capital

Poor diversification

The 3 months correlation between Sparebank and Polar is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Sparebank i.e., Sparebank and Polar Capital go up and down completely randomly.

Pair Corralation between Sparebank and Polar Capital

Assuming the 90 days trading horizon Sparebank 1 SR is expected to generate 0.56 times more return on investment than Polar Capital. However, Sparebank 1 SR is 1.79 times less risky than Polar Capital. It trades about 0.2 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.04 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Sparebank 1 SR  vs.  Polar Capital Technology

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.

Polar Capital Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Polar Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sparebank and Polar Capital

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

The idea behind Sparebank 1 SR and Polar Capital Technology 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.