Correlation Between Romsdal Sparebank and Xplora Technologies

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

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

Diversification Opportunities for Romsdal Sparebank and Xplora Technologies

0.92

Correlation Coefficient

Romsdal Sparebank  Xplora Technologies

Almost no diversification

The 3 months correlation between Romsdal and Xplora is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Romsdal Sparebank and Xplora Technologies As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xplora Technologies 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 Xplora Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xplora Technologies has no effect on the direction of Romsdal Sparebank i.e., Romsdal Sparebank and Xplora Technologies go up and down completely randomly.

Pair Corralation between Romsdal Sparebank and Xplora Technologies

Assuming the 90 days trading horizon Romsdal Sparebank is expected to generate 7.54 times less return on investment than Xplora Technologies. But when comparing it to its historical volatility, Romsdal Sparebank is 3.9 times less risky than Xplora Technologies. It trades about 0.18 of its potential returns per unit of risk. Xplora Technologies As is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,690  in Xplora Technologies As on September 4, 2024 and sell it today you would earn a total of  1,560  from holding Xplora Technologies As or generate 92.31% return on investment over 90 days.

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

Romsdal Sparebank  vs.  Xplora Technologies As

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.

Xplora Technologies

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Xplora Technologies As are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Xplora Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Romsdal Sparebank and Xplora Technologies

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

The idea behind Romsdal Sparebank and Xplora Technologies As 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.