Correlation Between Shelf Drilling and Sparebanken Ost

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

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

Diversification Opportunities for Shelf Drilling and Sparebanken Ost

-0.36

Correlation Coefficient

Shelf Drilling  Sparebanken Ost

Very good diversification

The 3 months correlation between Shelf and Sparebanken is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shelf Drilling and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost and Shelf Drilling 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 Shelf Drilling are associated (or correlated) with Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Shelf Drilling i.e., Shelf Drilling and Sparebanken Ost go up and down completely randomly.

Pair Corralation between Shelf Drilling and Sparebanken Ost

Assuming the 90 days trading horizon Shelf Drilling is expected to under-perform the Sparebanken Ost. In addition to that, Shelf Drilling is 3.41 times more volatile than Sparebanken Ost. It trades about -0.14 of its total potential returns per unit of risk. Sparebanken Ost is currently generating about 0.19 per unit of volatility. If you would invest  6,771  in Sparebanken Ost on November 20, 2024 and sell it today you would earn a total of  1,139  from holding Sparebanken Ost or generate 16.82% return on investment over 90 days.

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

Shelf Drilling  vs.  Sparebanken Ost

Shelf Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shelf Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sparebanken Ost

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shelf Drilling and Sparebanken Ost

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

The idea behind Shelf Drilling and Sparebanken Ost 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.