Correlation Between Skue Sparebank and Clean Seas

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

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

Diversification Opportunities for Skue Sparebank and Clean Seas

0.79

Correlation Coefficient

Skue Sparebank  Clean Seas

Poor diversification

The 3 months correlation between Skue and Clean is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank and Clean Seas Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Seas Seafood and Skue 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 Skue Sparebank are associated (or correlated) with Clean Seas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Seas Seafood has no effect on the direction of Skue Sparebank i.e., Skue Sparebank and Clean Seas go up and down completely randomly.

Pair Corralation between Skue Sparebank and Clean Seas

Assuming the 90 days trading horizon Skue Sparebank is expected to generate 1.4 times less return on investment than Clean Seas. But when comparing it to its historical volatility, Skue Sparebank is 4.44 times less risky than Clean Seas. It trades about 0.32 of its potential returns per unit of risk. Clean Seas Seafood is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Clean Seas Seafood on December 29, 2024 and sell it today you would earn a total of  25.00  from holding Clean Seas Seafood or generate 29.41% return on investment over 90 days.

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

Skue Sparebank  vs.  Clean Seas Seafood

Skue Sparebank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skue Sparebank are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Skue Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Clean Seas Seafood

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Seas Seafood are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Clean Seas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skue Sparebank and Clean Seas

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

The idea behind Skue Sparebank and Clean Seas Seafood 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.