Correlation Between Deep Value and Romsdal Sparebank

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

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

Diversification Opportunities for Deep Value and Romsdal Sparebank

-0.34

Correlation Coefficient

Deep Value  Romsdal Sparebank

Very good diversification

The 3 months correlation between Deep and Romsdal is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Romsdal Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romsdal Sparebank and Deep Value 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 Deep Value Driller are associated (or correlated) with Romsdal Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romsdal Sparebank has no effect on the direction of Deep Value i.e., Deep Value and Romsdal Sparebank go up and down completely randomly.

Pair Corralation between Deep Value and Romsdal Sparebank

Assuming the 90 days trading horizon Deep Value Driller is expected to generate 5.68 times more return on investment than Romsdal Sparebank. However, Deep Value is 5.68 times more volatile than Romsdal Sparebank. It trades about 0.02 of its potential returns per unit of risk. Romsdal Sparebank is currently generating about 0.08 per unit of risk. If you would invest  1,511  in Deep Value Driller on December 21, 2024 and sell it today you would lose (11.00) from holding Deep Value Driller or give up 0.73% of portfolio value over 90 days.

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

Deep Value Driller  vs.  Romsdal Sparebank

Deep Value Driller

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deep Value Driller are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Deep Value may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Romsdal Sparebank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Romsdal Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Romsdal Sparebank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Deep Value and Romsdal Sparebank

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

The idea behind Deep Value Driller and Romsdal Sparebank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..