Correlation Between Sparebank and Xplora Technologies

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

Diversification Opportunities for Sparebank and Xplora Technologies

0.02

Correlation Coefficient

Sparebank  Xplora Technologies

Significant diversification

The 3 months correlation between Sparebank and Xplora is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Xplora Technologies As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xplora Technologies 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 Xplora Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xplora Technologies has no effect on the direction of Sparebank i.e., Sparebank and Xplora Technologies go up and down completely randomly.

Pair Corralation between Sparebank and Xplora Technologies

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.34 times more return on investment than Xplora Technologies. However, Sparebank 1 SMN is 2.98 times less risky than Xplora Technologies. It trades about 0.19 of its potential returns per unit of risk. Xplora Technologies As is currently generating about 0.01 per unit of risk. If you would invest  16,492  in Sparebank 1 SMN on November 28, 2024 and sell it today you would earn a total of  1,632  from holding Sparebank 1 SMN or generate 9.9% 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.  Xplora Technologies As

Sparebank 1 SMN

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Xplora Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xplora Technologies As are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Xplora Technologies is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sparebank and Xplora Technologies

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

The idea behind Sparebank 1 SMN and Xplora Technologies 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.