Correlation Between Sparebank and Otovo AS

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

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

Diversification Opportunities for Sparebank and Otovo AS

0.04

Correlation Coefficient

Sparebank  Otovo AS

Significant diversification

The 3 months correlation between Sparebank and Otovo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Otovo AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otovo AS and 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 Sparebank 1 SMN are associated (or correlated) with Otovo AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otovo AS has no effect on the direction of Sparebank i.e., Sparebank and Otovo AS go up and down completely randomly.

Pair Corralation between Sparebank and Otovo AS

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.16 times more return on investment than Otovo AS. However, Sparebank 1 SMN is 6.07 times less risky than Otovo AS. It trades about 0.11 of its potential returns per unit of risk. Otovo AS is currently generating about -0.03 per unit of risk. If you would invest  15,454  in Sparebank 1 SMN on September 3, 2024 and sell it today you would earn a total of  956.00  from holding Sparebank 1 SMN or generate 6.19% return on investment over 90 days.

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

Sparebank 1 SMN  vs.  Otovo AS

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Otovo AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otovo AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sparebank and Otovo AS

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

The idea behind Sparebank 1 SMN and Otovo AS 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.