Correlation Between Sparebank and Polaris Media

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

Diversification Opportunities for Sparebank and Polaris Media

-0.18

Correlation Coefficient

Sparebank  Polaris Media

Good diversification

The 3 months correlation between Sparebank and Polaris is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Polaris Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Media 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 Polaris Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Media has no effect on the direction of Sparebank i.e., Sparebank and Polaris Media go up and down completely randomly.

Pair Corralation between Sparebank and Polaris Media

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.34 times more return on investment than Polaris Media. However, Sparebank 1 SMN is 2.96 times less risky than Polaris Media. It trades about 0.24 of its potential returns per unit of risk. Polaris Media is currently generating about 0.01 per unit of risk. If you would invest  16,264  in Sparebank 1 SMN on December 2, 2024 and sell it today you would earn a total of  2,086  from holding Sparebank 1 SMN or generate 12.83% return on investment over 90 days.

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

Sparebank 1 SMN  vs.  Polaris Media

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 18 (%) 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.

Polaris Media

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sparebank and Polaris Media

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

The idea behind Sparebank 1 SMN and Polaris Media 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.