Correlation Between Chocoladefabriken and Sparebank

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

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

Diversification Opportunities for Chocoladefabriken and Sparebank

-0.62

Correlation Coefficient

Chocoladefabriken  Sparebank

Excellent diversification

The 3 months correlation between Chocoladefabriken and Sparebank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chocoladefabriken Lindt Spruen 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 Chocoladefabriken 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 Chocoladefabriken Lindt Spruengli 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 Chocoladefabriken i.e., Chocoladefabriken and Sparebank go up and down completely randomly.

Pair Corralation between Chocoladefabriken and Sparebank

Assuming the 90 days trading horizon Chocoladefabriken Lindt Spruengli is expected to under-perform the Sparebank. But the stock apears to be less risky and, when comparing its historical volatility, Chocoladefabriken Lindt Spruengli is 1.36 times less risky than Sparebank. The stock trades about -0.12 of its potential returns per unit of risk. The Sparebank 1 SR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  13,560  in Sparebank 1 SR on October 8, 2024 and sell it today you would earn a total of  1,220  from holding Sparebank 1 SR or generate 9.0% return on investment over 90 days.

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

Chocoladefabriken Lindt Spruen  vs.  Sparebank 1 SR

Chocoladefabriken Lindt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chocoladefabriken Lindt Spruengli has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Chocoladefabriken is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sparebank 1 SR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chocoladefabriken and Sparebank

The main advantage of trading using opposite Chocoladefabriken and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chocoladefabriken 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 Chocoladefabriken Lindt Spruengli 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.