Correlation Between Sogn Sparebank and Arctic Bioscience

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

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

Diversification Opportunities for Sogn Sparebank and Arctic Bioscience

-0.43

Correlation Coefficient

Sogn Sparebank  Arctic Bioscience

Very good diversification

The 3 months correlation between Sogn and Arctic is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sogn Sparebank and Arctic Bioscience AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Bioscience and Sogn 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 Sogn Sparebank are associated (or correlated) with Arctic Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Bioscience has no effect on the direction of Sogn Sparebank i.e., Sogn Sparebank and Arctic Bioscience go up and down completely randomly.

Pair Corralation between Sogn Sparebank and Arctic Bioscience

Assuming the 90 days trading horizon Sogn Sparebank is expected to generate 33.38 times less return on investment than Arctic Bioscience. But when comparing it to its historical volatility, Sogn Sparebank is 2.77 times less risky than Arctic Bioscience. It trades about 0.02 of its potential returns per unit of risk. Arctic Bioscience AS is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Arctic Bioscience AS on December 27, 2024 and sell it today you would earn a total of  390.00  from holding Arctic Bioscience AS or generate 200.0% return on investment over 90 days.

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

Sogn Sparebank  vs.  Arctic Bioscience AS

Sogn Sparebank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sogn Sparebank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Sogn Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Arctic Bioscience

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Bioscience AS are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Arctic Bioscience disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sogn Sparebank and Arctic Bioscience

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

The idea behind Sogn Sparebank and Arctic Bioscience 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.