Correlation Between Romsdal Sparebank and Photocure

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

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

Diversification Opportunities for Romsdal Sparebank and Photocure

0.03

Correlation Coefficient

Romsdal Sparebank  Photocure

Significant diversification

The 3 months correlation between Romsdal and Photocure is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Romsdal Sparebank and Photocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photocure 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 Photocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photocure has no effect on the direction of Romsdal Sparebank i.e., Romsdal Sparebank and Photocure go up and down completely randomly.

Pair Corralation between Romsdal Sparebank and Photocure

Assuming the 90 days trading horizon Romsdal Sparebank is expected to generate 3.82 times less return on investment than Photocure. But when comparing it to its historical volatility, Romsdal Sparebank is 2.26 times less risky than Photocure. It trades about 0.03 of its potential returns per unit of risk. Photocure is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,040  in Photocure on December 4, 2024 and sell it today you would earn a total of  280.00  from holding Photocure or generate 5.56% return on investment over 90 days.

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

Romsdal Sparebank  vs.  Photocure

Romsdal Sparebank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Romsdal Sparebank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Romsdal Sparebank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Photocure

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Photocure are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Photocure may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Romsdal Sparebank and Photocure

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

The idea behind Romsdal Sparebank and Photocure 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.