Correlation Between Skue Sparebank and OBX Consumer

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

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

Diversification Opportunities for Skue Sparebank and OBX Consumer

0.57

Correlation Coefficient

Skue Sparebank  OBX Consumer

Very weak diversification

The 3 months correlation between Skue and OBX is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank and OBX Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBX Consumer Staples 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 OBX Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBX Consumer Staples has no effect on the direction of Skue Sparebank i.e., Skue Sparebank and OBX Consumer go up and down completely randomly.

Pair Corralation between Skue Sparebank and OBX Consumer

Assuming the 90 days trading horizon Skue Sparebank is expected to generate 1.45 times less return on investment than OBX Consumer. In addition to that, Skue Sparebank is 1.26 times more volatile than OBX Consumer Staples. It trades about 0.07 of its total potential returns per unit of risk. OBX Consumer Staples is currently generating about 0.12 per unit of volatility. If you would invest  337,136  in OBX Consumer Staples on September 5, 2024 and sell it today you would earn a total of  26,330  from holding OBX Consumer Staples or generate 7.81% return on investment over 90 days.

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

Skue Sparebank  vs.  OBX Consumer Staples

Pair Trading with Skue Sparebank and OBX Consumer

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

The idea behind Skue Sparebank and OBX Consumer Staples 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.