Correlation Between Sparebanken Sor and Sparebank

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

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

Diversification Opportunities for Sparebanken Sor and Sparebank

0.94

Correlation Coefficient

Sparebanken Sor  Sparebank

Almost no diversification

The 3 months correlation between Sparebanken and Sparebank is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Sor and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Sparebanken Sor 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 Sparebanken Sor 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 SMN has no effect on the direction of Sparebanken Sor i.e., Sparebanken Sor and Sparebank go up and down completely randomly.

Pair Corralation between Sparebanken Sor and Sparebank

Assuming the 90 days trading horizon Sparebanken Sor is expected to generate 1.26 times less return on investment than Sparebank. In addition to that, Sparebanken Sor is 1.33 times more volatile than Sparebank 1 SMN. It trades about 0.13 of its total potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.22 per unit of volatility. If you would invest  16,492  in Sparebank 1 SMN on November 28, 2024 and sell it today you would earn a total of  1,948  from holding Sparebank 1 SMN or generate 11.81% return on investment over 90 days.

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

Sparebanken Sor  vs.  Sparebank 1 SMN

Sparebanken Sor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Sor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sparebanken Sor may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Sparebank 1 SMN

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 17 (%) 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 March 2025.

Pair Trading with Sparebanken Sor and Sparebank

The main advantage of trading using opposite Sparebanken Sor and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebanken Sor 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 Sparebanken Sor and Sparebank 1 SMN 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.