Correlation Between Sparinvest INDEX and Cemat AS

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

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

Diversification Opportunities for Sparinvest INDEX and Cemat AS

-0.6

Correlation Coefficient

Sparinvest INDEX  Cemat AS

Excellent diversification

The 3 months correlation between Sparinvest and Cemat is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Cemat AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemat AS and Sparinvest INDEX 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 Sparinvest INDEX Globale are associated (or correlated) with Cemat AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemat AS has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Cemat AS go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Cemat AS

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to under-perform the Cemat AS. But the fund apears to be less risky and, when comparing its historical volatility, Sparinvest INDEX Globale is 2.61 times less risky than Cemat AS. The fund trades about -0.13 of its potential returns per unit of risk. The Cemat AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  104.00  in Cemat AS on October 10, 2024 and sell it today you would earn a total of  2.00  from holding Cemat AS or generate 1.92% return on investment over 90 days.

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

Sparinvest INDEX Globale  vs.  Cemat AS

Sparinvest INDEX Globale

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cemat AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemat AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sparinvest INDEX and Cemat AS

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

The idea behind Sparinvest INDEX Globale and Cemat 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.