Correlation Between Morrow Bank and Sparebank

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

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

Diversification Opportunities for Morrow Bank and Sparebank

0.68

Correlation Coefficient

Morrow Bank  Sparebank

Poor diversification

The 3 months correlation between Morrow and Sparebank is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Morrow Bank ASA and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Morrow Bank 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 Morrow Bank ASA 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 SMN has no effect on the direction of Morrow Bank i.e., Morrow Bank and Sparebank go up and down completely randomly.

Pair Corralation between Morrow Bank and Sparebank

Assuming the 90 days trading horizon Morrow Bank ASA is expected to generate 2.66 times more return on investment than Sparebank. However, Morrow Bank is 2.66 times more volatile than Sparebank 1 SMN. It trades about 0.26 of its potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.15 per unit of risk. If you would invest  638.00  in Morrow Bank ASA on October 26, 2024 and sell it today you would earn a total of  266.00  from holding Morrow Bank ASA or generate 41.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Morrow Bank ASA  vs.  Sparebank 1 SMN

Morrow Bank ASA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morrow Bank ASA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Morrow Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sparebank 1 SMN

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 11 (%) 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 February 2025.

Pair Trading with Morrow Bank and Sparebank

The main advantage of trading using opposite Morrow Bank and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morrow Bank 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 Morrow Bank ASA and Sparebank 1 SMN 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.