Correlation Between Romsdal Sparebank and Entra ASA

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

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

Diversification Opportunities for Romsdal Sparebank and Entra ASA

-0.8

Correlation Coefficient

Romsdal Sparebank  Entra ASA

Pay attention - limited upside

The 3 months correlation between Romsdal and Entra is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Romsdal Sparebank and Entra ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entra ASA and Romsdal 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 Romsdal Sparebank are associated (or correlated) with Entra ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entra ASA has no effect on the direction of Romsdal Sparebank i.e., Romsdal Sparebank and Entra ASA go up and down completely randomly.

Pair Corralation between Romsdal Sparebank and Entra ASA

Assuming the 90 days trading horizon Romsdal Sparebank is expected to generate 0.47 times more return on investment than Entra ASA. However, Romsdal Sparebank is 2.11 times less risky than Entra ASA. It trades about 0.18 of its potential returns per unit of risk. Entra ASA is currently generating about -0.04 per unit of risk. If you would invest  11,378  in Romsdal Sparebank on September 4, 2024 and sell it today you would earn a total of  1,060  from holding Romsdal Sparebank or generate 9.32% return on investment over 90 days.

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

Romsdal Sparebank  vs.  Entra ASA

Romsdal Sparebank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Romsdal Sparebank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Romsdal Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Entra ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entra ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Entra ASA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Romsdal Sparebank and Entra ASA

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

The idea behind Romsdal Sparebank and Entra ASA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.