Correlation Between Aurskog Sparebank and Sparebanken Sor

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

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

Diversification Opportunities for Aurskog Sparebank and Sparebanken Sor

0.45

Correlation Coefficient

Aurskog Sparebank  Sparebanken Sor

Very weak diversification

The 3 months correlation between Aurskog and Sparebanken is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aurskog Sparebank and Sparebanken Sor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Sor and Aurskog 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 Aurskog Sparebank are associated (or correlated) with Sparebanken Sor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Sor has no effect on the direction of Aurskog Sparebank i.e., Aurskog Sparebank and Sparebanken Sor go up and down completely randomly.

Pair Corralation between Aurskog Sparebank and Sparebanken Sor

Assuming the 90 days trading horizon Aurskog Sparebank is expected to generate 1.56 times less return on investment than Sparebanken Sor. But when comparing it to its historical volatility, Aurskog Sparebank is 1.16 times less risky than Sparebanken Sor. It trades about 0.11 of its potential returns per unit of risk. Sparebanken Sor is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  18,214  in Sparebanken Sor on December 2, 2024 and sell it today you would earn a total of  1,876  from holding Sparebanken Sor or generate 10.3% return on investment over 90 days.

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

Aurskog Sparebank  vs.  Sparebanken Sor

Aurskog Sparebank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurskog Sparebank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aurskog Sparebank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sparebanken Sor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Sor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sparebanken Sor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aurskog Sparebank and Sparebanken Sor

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

The idea behind Aurskog Sparebank and Sparebanken Sor 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.