Correlation Between Sogn Sparebank and SpareBank

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

By analyzing existing cross correlation between Sogn Sparebank and SpareBank 1 stlandet, you can compare the effects of market volatilities on Sogn Sparebank and 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 Sogn Sparebank with a short position of SpareBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sogn Sparebank and SpareBank.

Diversification Opportunities for Sogn Sparebank and SpareBank

0.69

Correlation Coefficient

Sogn Sparebank  SpareBank

Poor diversification

The 3 months correlation between Sogn and SpareBank is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sogn Sparebank and SpareBank 1 stlandet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 stlandet 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 SpareBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpareBank 1 stlandet has no effect on the direction of Sogn Sparebank i.e., Sogn Sparebank and SpareBank go up and down completely randomly.

Pair Corralation between Sogn Sparebank and SpareBank

Assuming the 90 days trading horizon Sogn Sparebank is expected to under-perform the SpareBank. In addition to that, Sogn Sparebank is 3.41 times more volatile than SpareBank 1 stlandet. It trades about -0.02 of its total potential returns per unit of risk. SpareBank 1 stlandet is currently generating about 0.17 per unit of volatility. If you would invest  14,982  in SpareBank 1 stlandet on December 1, 2024 and sell it today you would earn a total of  1,442  from holding SpareBank 1 stlandet or generate 9.62% return on investment over 90 days.

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

Sogn Sparebank  vs.  SpareBank 1 stlandet

Sogn Sparebank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sogn Sparebank has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SpareBank 1 stlandet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 stlandet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, SpareBank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sogn Sparebank and SpareBank

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

The idea behind Sogn Sparebank and SpareBank 1 stlandet 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.