Correlation Between Impax Asset and Sparebank

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

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

Diversification Opportunities for Impax Asset and Sparebank

-0.62

Correlation Coefficient

Impax Asset  Sparebank

Excellent diversification

The 3 months correlation between Impax and Sparebank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Impax Asset Management and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and Impax Asset 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 Impax Asset Management 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 SR has no effect on the direction of Impax Asset i.e., Impax Asset and Sparebank go up and down completely randomly.

Pair Corralation between Impax Asset and Sparebank

Assuming the 90 days trading horizon Impax Asset Management is expected to under-perform the Sparebank. In addition to that, Impax Asset is 2.19 times more volatile than Sparebank 1 SR. It trades about -0.08 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.3 per unit of volatility. If you would invest  14,440  in Sparebank 1 SR on December 24, 2024 and sell it today you would earn a total of  2,560  from holding Sparebank 1 SR or generate 17.73% return on investment over 90 days.

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

Impax Asset Management  vs.  Sparebank 1 SR

Impax Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impax Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sparebank 1 SR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sparebank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impax Asset and Sparebank

The main advantage of trading using opposite Impax Asset and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impax Asset 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 Impax Asset Management and Sparebank 1 SR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.