Correlation Between Helgeland Sparebank and Sparebank

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

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

Diversification Opportunities for Helgeland Sparebank and Sparebank

0.84

Correlation Coefficient

Helgeland Sparebank  Sparebank

Very poor diversification

The 3 months correlation between Helgeland and Sparebank is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Helgeland Sparebank 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 Helgeland 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 Helgeland Sparebank 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 Helgeland Sparebank i.e., Helgeland Sparebank and Sparebank go up and down completely randomly.

Pair Corralation between Helgeland Sparebank and Sparebank

Assuming the 90 days trading horizon Helgeland Sparebank is expected to generate 1.71 times more return on investment than Sparebank. However, Helgeland Sparebank is 1.71 times more volatile than Sparebank 1 SMN. It trades about 0.08 of its potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.11 per unit of risk. If you would invest  13,028  in Helgeland Sparebank on September 3, 2024 and sell it today you would earn a total of  972.00  from holding Helgeland Sparebank or generate 7.46% return on investment over 90 days.

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

Helgeland Sparebank  vs.  Sparebank 1 SMN

Helgeland Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Helgeland Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Helgeland Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sparebank 1 SMN

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 9 (%) 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 Helgeland Sparebank and Sparebank

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

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.