Correlation Between Sparebank and Young Cos

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

Diversification Opportunities for Sparebank and Young Cos

0.44

Correlation Coefficient

Sparebank  Young Cos

Very weak diversification

The 3 months correlation between Sparebank and Young is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Young Cos Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Cos Brewery 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 Young Cos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Cos Brewery has no effect on the direction of Sparebank i.e., Sparebank and Young Cos go up and down completely randomly.

Pair Corralation between Sparebank and Young Cos

Assuming the 90 days trading horizon Sparebank 1 SR is expected to generate 0.98 times more return on investment than Young Cos. However, Sparebank 1 SR is 1.02 times less risky than Young Cos. It trades about 0.07 of its potential returns per unit of risk. Young Cos Brewery is currently generating about 0.05 per unit of risk. If you would invest  14,230  in Sparebank 1 SR on September 21, 2024 and sell it today you would earn a total of  290.00  from holding Sparebank 1 SR or generate 2.04% return on investment over 90 days.

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

Sparebank 1 SR  vs.  Young Cos Brewery

Sparebank 1 SR

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 9 (%) 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 January 2025.

Young Cos Brewery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Young Cos Brewery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Young Cos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sparebank and Young Cos

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

The idea behind Sparebank 1 SR and Young Cos Brewery 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.