Correlation Between Europris ASA and Sparebank

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

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

Diversification Opportunities for Europris ASA and Sparebank

0.45

Correlation Coefficient

Europris ASA  Sparebank

Very weak diversification

The 3 months correlation between Europris and Sparebank is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Europris ASA and Sparebank 1 Nord Norge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 Nord and Europris 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 Europris 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 Nord has no effect on the direction of Europris ASA i.e., Europris ASA and Sparebank go up and down completely randomly.

Pair Corralation between Europris ASA and Sparebank

Assuming the 90 days trading horizon Europris ASA is expected to generate 1.58 times more return on investment than Sparebank. However, Europris ASA is 1.58 times more volatile than Sparebank 1 Nord Norge. It trades about 0.36 of its potential returns per unit of risk. Sparebank 1 Nord Norge is currently generating about 0.09 per unit of risk. If you would invest  6,500  in Europris ASA on September 13, 2024 and sell it today you would earn a total of  755.00  from holding Europris ASA or generate 11.62% return on investment over 90 days.

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

Europris ASA  vs.  Sparebank 1 Nord Norge

Europris ASA

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Europris ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Europris ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sparebank 1 Nord

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 Nord Norge are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Europris ASA and Sparebank

The main advantage of trading using opposite Europris ASA and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europris 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 Europris ASA and Sparebank 1 Nord Norge 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.