Correlation Between Arcticzymes Technologies and Sparebank

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

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

Diversification Opportunities for Arcticzymes Technologies and Sparebank

-0.66

Correlation Coefficient

Arcticzymes Technologies  Sparebank

Excellent diversification

The 3 months correlation between Arcticzymes and Sparebank is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Arcticzymes Technologies 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 Arcticzymes Technologies 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 Arcticzymes Technologies 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 Arcticzymes Technologies i.e., Arcticzymes Technologies and Sparebank go up and down completely randomly.

Pair Corralation between Arcticzymes Technologies and Sparebank

Assuming the 90 days trading horizon Arcticzymes Technologies ASA is expected to under-perform the Sparebank. In addition to that, Arcticzymes Technologies is 3.9 times more volatile than Sparebank 1 SMN. It trades about -0.16 of its total potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.09 per unit of volatility. If you would invest  15,650  in Sparebank 1 SMN on September 2, 2024 and sell it today you would earn a total of  760.00  from holding Sparebank 1 SMN or generate 4.86% return on investment over 90 days.

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

Arcticzymes Technologies ASA  vs.  Sparebank 1 SMN

Arcticzymes Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcticzymes Technologies ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sparebank 1 SMN

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arcticzymes Technologies and Sparebank

The main advantage of trading using opposite Arcticzymes Technologies and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcticzymes Technologies 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 Arcticzymes Technologies 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.