Correlation Between Analog Devices and SpareBank

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

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

Diversification Opportunities for Analog Devices and SpareBank

0.0

Correlation Coefficient

Analog Devices  SpareBank

Pay attention - limited upside

The 3 months correlation between Analog and SpareBank is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and SpareBank 1 SR Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 SR and Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and SpareBank go up and down completely randomly.

Pair Corralation between Analog Devices and SpareBank

Considering the 90-day investment horizon Analog Devices is expected to generate 3.97 times less return on investment than SpareBank. But when comparing it to its historical volatility, Analog Devices is 3.21 times less risky than SpareBank. It trades about 0.05 of its potential returns per unit of risk. SpareBank 1 SR Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  715.00  in SpareBank 1 SR Bank on October 11, 2024 and sell it today you would earn a total of  750.00  from holding SpareBank 1 SR Bank or generate 104.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	65.05%
Values	Daily Returns

Analog Devices  vs.  SpareBank 1 SR Bank

Analog Devices

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

SpareBank 1 SR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SpareBank 1 SR Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, SpareBank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Analog Devices and SpareBank

The main advantage of trading using opposite Analog Devices and SpareBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices and SpareBank 1 SR Bank 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.