Correlation Between Polaris Media and Sparebanken Ost

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

By analyzing existing cross correlation between Polaris Media and Sparebanken Ost, you can compare the effects of market volatilities on Polaris Media and Sparebanken Ost 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 Polaris Media with a short position of Sparebanken Ost. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Media and Sparebanken Ost.

Diversification Opportunities for Polaris Media and Sparebanken Ost

0.81

Correlation Coefficient

Polaris Media  Sparebanken Ost

Very poor diversification

The 3 months correlation between Polaris and Sparebanken is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Media and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost and Polaris Media 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 Polaris Media are associated (or correlated) with Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Polaris Media i.e., Polaris Media and Sparebanken Ost go up and down completely randomly.

Pair Corralation between Polaris Media and Sparebanken Ost

Assuming the 90 days trading horizon Polaris Media is expected to under-perform the Sparebanken Ost. In addition to that, Polaris Media is 2.36 times more volatile than Sparebanken Ost. It trades about -0.02 of its total potential returns per unit of risk. Sparebanken Ost is currently generating about 0.25 per unit of volatility. If you would invest  6,699  in Sparebanken Ost on October 10, 2024 and sell it today you would earn a total of  371.00  from holding Sparebanken Ost or generate 5.54% return on investment over 90 days.

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

Polaris Media  vs.  Sparebanken Ost

Polaris Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Polaris Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sparebanken Ost

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polaris Media and Sparebanken Ost

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

The idea behind Polaris Media and Sparebanken Ost 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.