Correlation Between Sparebank and PCI Biotech

Can any of the company-specific risk be diversified away by investing in both Sparebank and PCI Biotech 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 PCI Biotech 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 PCI Biotech Holding, you can compare the effects of market volatilities on Sparebank and PCI Biotech 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 PCI Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and PCI Biotech.

Diversification Opportunities for Sparebank and PCI Biotech

0.19

Correlation Coefficient

Sparebank  PCI Biotech

Average diversification

The 3 months correlation between Sparebank and PCI is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and PCI Biotech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI Biotech Holding 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 PCI Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI Biotech Holding has no effect on the direction of Sparebank i.e., Sparebank and PCI Biotech go up and down completely randomly.

Pair Corralation between Sparebank and PCI Biotech

Assuming the 90 days trading horizon Sparebank is expected to generate 1.86 times less return on investment than PCI Biotech. But when comparing it to its historical volatility, Sparebank 1 SMN is 6.41 times less risky than PCI Biotech. It trades about 0.23 of its potential returns per unit of risk. PCI Biotech Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  119.00  in PCI Biotech Holding on December 30, 2024 and sell it today you would earn a total of  19.00  from holding PCI Biotech Holding or generate 15.97% 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.  PCI Biotech Holding

Sparebank 1 SMN

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

PCI Biotech Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PCI Biotech Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, PCI Biotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparebank and PCI Biotech

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

The idea behind Sparebank 1 SMN and PCI Biotech Holding 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.