Correlation Between Norske Skog and SpareBank

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

By analyzing existing cross correlation between Norske Skog Asa and SpareBank 1 stlandet, you can compare the effects of market volatilities on Norske Skog 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 Norske Skog with a short position of SpareBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norske Skog and SpareBank.

Diversification Opportunities for Norske Skog and SpareBank

0.07

Correlation Coefficient

Norske Skog  SpareBank

Significant diversification

The 3 months correlation between Norske and SpareBank is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Norske Skog Asa and SpareBank 1 stlandet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 stlandet and Norske Skog 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 Norske Skog 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 stlandet has no effect on the direction of Norske Skog i.e., Norske Skog and SpareBank go up and down completely randomly.

Pair Corralation between Norske Skog and SpareBank

Assuming the 90 days trading horizon Norske Skog is expected to generate 1.45 times less return on investment than SpareBank. In addition to that, Norske Skog is 5.47 times more volatile than SpareBank 1 stlandet. It trades about 0.02 of its total potential returns per unit of risk. SpareBank 1 stlandet is currently generating about 0.18 per unit of volatility. If you would invest  15,660  in SpareBank 1 stlandet on December 24, 2024 and sell it today you would earn a total of  1,646  from holding SpareBank 1 stlandet or generate 10.51% return on investment over 90 days.

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

Norske Skog Asa  vs.  SpareBank 1 stlandet

Norske Skog Asa

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norske Skog Asa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Norske Skog may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SpareBank 1 stlandet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 stlandet are ranked lower than 14 (%) 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 April 2025.

Pair Trading with Norske Skog and SpareBank

The main advantage of trading using opposite Norske Skog and SpareBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norske Skog 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 Norske Skog Asa and SpareBank 1 stlandet 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.