Correlation Between Melhus Sparebank and Jaeren Sparebank

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

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

Diversification Opportunities for Melhus Sparebank and Jaeren Sparebank

0.22

Correlation Coefficient

Melhus Sparebank  Jaeren Sparebank

Modest diversification

The 3 months correlation between Melhus and Jaeren is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Melhus Sparebank and Jaeren Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaeren Sparebank and Melhus 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 Melhus Sparebank are associated (or correlated) with Jaeren Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaeren Sparebank has no effect on the direction of Melhus Sparebank i.e., Melhus Sparebank and Jaeren Sparebank go up and down completely randomly.

Pair Corralation between Melhus Sparebank and Jaeren Sparebank

Assuming the 90 days trading horizon Melhus Sparebank is expected to under-perform the Jaeren Sparebank. But the stock apears to be less risky and, when comparing its historical volatility, Melhus Sparebank is 1.46 times less risky than Jaeren Sparebank. The stock trades about -0.01 of its potential returns per unit of risk. The Jaeren Sparebank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  30,995  in Jaeren Sparebank on September 4, 2024 and sell it today you would earn a total of  1,400  from holding Jaeren Sparebank or generate 4.52% return on investment over 90 days.

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

Melhus Sparebank  vs.  Jaeren Sparebank

Melhus Sparebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melhus Sparebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Melhus Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jaeren Sparebank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jaeren Sparebank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Jaeren 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 Melhus Sparebank and Jaeren Sparebank

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

The idea behind Melhus Sparebank and Jaeren 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.