Correlation Between Pryme BV and Grong Sparebank

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

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

Diversification Opportunities for Pryme BV and Grong Sparebank

0.27

Correlation Coefficient

Pryme BV  Grong Sparebank

Modest diversification

The 3 months correlation between Pryme and Grong is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pryme BV and Grong Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grong Sparebank and Pryme BV 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 Pryme BV are associated (or correlated) with Grong Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grong Sparebank has no effect on the direction of Pryme BV i.e., Pryme BV and Grong Sparebank go up and down completely randomly.

Pair Corralation between Pryme BV and Grong Sparebank

Assuming the 90 days trading horizon Pryme BV is expected to generate 8.63 times more return on investment than Grong Sparebank. However, Pryme BV is 8.63 times more volatile than Grong Sparebank. It trades about 0.17 of its potential returns per unit of risk. Grong Sparebank is currently generating about 0.08 per unit of risk. If you would invest  1,550  in Pryme BV on December 30, 2024 and sell it today you would earn a total of  1,440  from holding Pryme BV or generate 92.9% return on investment over 90 days.

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

Pryme BV  vs.  Grong Sparebank

Pryme BV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pryme BV are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pryme BV displayed solid returns over the last few months and may actually be approaching a breakup point.

Grong Sparebank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grong Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Grong Sparebank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pryme BV and Grong Sparebank

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

The idea behind Pryme BV and Grong 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.