Correlation Between Sparebank and Helgeland Sparebank

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

Diversification Opportunities for Sparebank and Helgeland Sparebank

0.9

Correlation Coefficient

Sparebank  Helgeland Sparebank

Almost no diversification

The 3 months correlation between Sparebank and Helgeland is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 Nord Norge and Helgeland Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helgeland 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 Helgeland Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helgeland Sparebank has no effect on the direction of Sparebank i.e., Sparebank and Helgeland Sparebank go up and down completely randomly.

Pair Corralation between Sparebank and Helgeland Sparebank

Assuming the 90 days trading horizon Sparebank 1 Nord Norge is expected to generate 0.61 times more return on investment than Helgeland Sparebank. However, Sparebank 1 Nord Norge is 1.65 times less risky than Helgeland Sparebank. It trades about 0.18 of its potential returns per unit of risk. Helgeland Sparebank is currently generating about 0.08 per unit of risk. If you would invest  10,710  in Sparebank 1 Nord Norge on September 2, 2024 and sell it today you would earn a total of  1,112  from holding Sparebank 1 Nord Norge or generate 10.38% return on investment over 90 days.

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

Sparebank 1 Nord Norge  vs.  Helgeland Sparebank

Sparebank 1 Nord

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 Nord Norge are ranked lower than 13 (%) 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.

Helgeland Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Helgeland Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Helgeland Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sparebank and Helgeland Sparebank

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

The idea behind Sparebank 1 Nord Norge and Helgeland 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.