Correlation Between Melhus Sparebank and North Energy

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

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

Diversification Opportunities for Melhus Sparebank and North Energy

0.33

Correlation Coefficient

Melhus Sparebank  North Energy

Weak diversification

The 3 months correlation between Melhus and North is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Melhus Sparebank and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy ASA 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 North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Melhus Sparebank i.e., Melhus Sparebank and North Energy go up and down completely randomly.

Pair Corralation between Melhus Sparebank and North Energy

Assuming the 90 days trading horizon Melhus Sparebank is expected to generate 0.4 times more return on investment than North Energy. However, Melhus Sparebank is 2.5 times less risky than North Energy. It trades about 0.16 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.05 per unit of risk. If you would invest  15,074  in Melhus Sparebank on December 23, 2024 and sell it today you would earn a total of  1,630  from holding Melhus Sparebank or generate 10.81% 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.  North Energy ASA

Melhus Sparebank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melhus Sparebank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Melhus Sparebank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

North Energy ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North Energy ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, North Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Melhus Sparebank and North Energy

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

The idea behind Melhus Sparebank and North Energy ASA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.