Correlation Between Sparebank and Aurskog Sparebank

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

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

Diversification Opportunities for Sparebank and Aurskog Sparebank

0.67

Correlation Coefficient

Sparebank  Aurskog Sparebank

Poor diversification

The 3 months correlation between Sparebank and Aurskog is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 Nord Norge and Aurskog Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurskog Sparebank 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 Nord Norge are associated (or correlated) with Aurskog Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurskog Sparebank has no effect on the direction of Sparebank i.e., Sparebank and Aurskog Sparebank go up and down completely randomly.

Pair Corralation between Sparebank and Aurskog Sparebank

Assuming the 90 days trading horizon Sparebank 1 Nord Norge is expected to generate 1.09 times more return on investment than Aurskog Sparebank. However, Sparebank is 1.09 times more volatile than Aurskog Sparebank. It trades about 0.2 of its potential returns per unit of risk. Aurskog Sparebank is currently generating about 0.05 per unit of risk. If you would invest  10,560  in Sparebank 1 Nord Norge on September 12, 2024 and sell it today you would earn a total of  1,262  from holding Sparebank 1 Nord Norge or generate 11.95% return on investment over 90 days.

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

Sparebank 1 Nord Norge  vs.  Aurskog Sparebank

Sparebank 1 Nord

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 Nord Norge 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 January 2025.

Aurskog Sparebank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurskog Sparebank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Aurskog Sparebank 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 Aurskog Sparebank

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

The idea behind Sparebank 1 Nord Norge and Aurskog Sparebank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.