Correlation Between Sparebank and Sogn Sparebank

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

By analyzing existing cross correlation between Sparebank 1 Ringerike and Sogn Sparebank, you can compare the effects of market volatilities on Sparebank and Sogn 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 Sogn Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Sogn Sparebank.

Diversification Opportunities for Sparebank and Sogn Sparebank

0.28

Correlation Coefficient

Sparebank  Sogn Sparebank

Modest diversification

The 3 months correlation between Sparebank and Sogn is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 Ringerike and Sogn Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sogn 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 Ringerike are associated (or correlated) with Sogn Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sogn Sparebank has no effect on the direction of Sparebank i.e., Sparebank and Sogn Sparebank go up and down completely randomly.

Pair Corralation between Sparebank and Sogn Sparebank

Assuming the 90 days trading horizon Sparebank is expected to generate 4.17 times less return on investment than Sogn Sparebank. But when comparing it to its historical volatility, Sparebank 1 Ringerike is 2.87 times less risky than Sogn Sparebank. It trades about 0.13 of its potential returns per unit of risk. Sogn Sparebank is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  20,100  in Sogn Sparebank on September 3, 2024 and sell it today you would earn a total of  6,295  from holding Sogn Sparebank or generate 31.32% return on investment over 90 days.

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

Sparebank 1 Ringerike  vs.  Sogn Sparebank

Sparebank 1 Ringerike

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 Ringerike are ranked lower than 10 (%) 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.

Sogn Sparebank

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Sparebank and Sogn Sparebank

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

The idea behind Sparebank 1 Ringerike and Sogn 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.