Correlation Between MG Credit and Sparebank

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

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

Diversification Opportunities for MG Credit and Sparebank

0.32

Correlation Coefficient

MG Credit  Sparebank

Weak diversification

The 3 months correlation between MGCI and Sparebank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding MG Credit Income 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 MG Credit 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 MG Credit Income 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 MG Credit i.e., MG Credit and Sparebank go up and down completely randomly.

Pair Corralation between MG Credit and Sparebank

Assuming the 90 days trading horizon MG Credit is expected to generate 1.22 times less return on investment than Sparebank. In addition to that, MG Credit is 1.13 times more volatile than Sparebank 1 SR. It trades about 0.06 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.08 per unit of volatility. If you would invest  14,700  in Sparebank 1 SR on October 25, 2024 and sell it today you would earn a total of  760.00  from holding Sparebank 1 SR or generate 5.17% return on investment over 90 days.

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

MG Credit Income  vs.  Sparebank 1 SR

MG Credit Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MG Credit Income are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MG Credit is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sparebank 1 SR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sparebank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MG Credit and Sparebank

The main advantage of trading using opposite MG Credit and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MG Credit 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 MG Credit Income 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.