Correlation Between Aker ASA and Sparebank

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

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

Diversification Opportunities for Aker ASA and Sparebank

0.68

Correlation Coefficient

Aker ASA  Sparebank

Poor diversification

The 3 months correlation between Aker and Sparebank is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Aker ASA 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 Aker ASA 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 SMN has no effect on the direction of Aker ASA i.e., Aker ASA and Sparebank go up and down completely randomly.

Pair Corralation between Aker ASA and Sparebank

Assuming the 90 days trading horizon Aker ASA is expected to generate 1.44 times less return on investment than Sparebank. In addition to that, Aker ASA is 1.63 times more volatile than Sparebank 1 SMN. It trades about 0.1 of its total potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.23 per unit of volatility. If you would invest  16,410  in Sparebank 1 SMN on November 29, 2024 and sell it today you would earn a total of  2,030  from holding Sparebank 1 SMN or generate 12.37% return on investment over 90 days.

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

Aker ASA  vs.  Sparebank 1 SMN

Aker ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker ASA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Sparebank 1 SMN

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aker ASA and Sparebank

The main advantage of trading using opposite Aker ASA and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker ASA 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 Aker ASA and Sparebank 1 SMN 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.