Correlation Between Scana ASA and Sogn Sparebank

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

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

Diversification Opportunities for Scana ASA and Sogn Sparebank

-0.46

Correlation Coefficient

Scana ASA  Sogn Sparebank

Very good diversification

The 3 months correlation between Scana and Sogn is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Scana ASA and Sogn Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sogn Sparebank and Scana ASA 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 Scana ASA 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 Scana ASA i.e., Scana ASA and Sogn Sparebank go up and down completely randomly.

Pair Corralation between Scana ASA and Sogn Sparebank

Assuming the 90 days trading horizon Scana ASA is expected to under-perform the Sogn Sparebank. In addition to that, Scana ASA is 1.23 times more volatile than Sogn Sparebank. It trades about -0.08 of its total potential returns per unit of risk. Sogn Sparebank is currently generating about 0.31 per unit of volatility. If you would invest  21,330  in Sogn Sparebank on September 9, 2024 and sell it today you would earn a total of  3,600  from holding Sogn Sparebank or generate 16.88% return on investment over 90 days.

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

Scana ASA  vs.  Sogn Sparebank

Scana ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scana ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sogn Sparebank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sogn Sparebank are ranked lower than 9 (%) 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 Scana ASA and Sogn Sparebank

The main advantage of trading using opposite Scana ASA and Sogn Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scana ASA 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 Scana ASA 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.