Correlation Between Sparinvest INDEX and Prime Office

Can any of the company-specific risk be diversified away by investing in both Sparinvest INDEX and Prime Office 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 Prime Office 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 Prime Office AS, you can compare the effects of market volatilities on Sparinvest INDEX and Prime Office 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 Prime Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest INDEX and Prime Office.

Diversification Opportunities for Sparinvest INDEX and Prime Office

-0.11

Correlation Coefficient

Sparinvest INDEX  Prime Office

Good diversification

The 3 months correlation between Sparinvest and Prime is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Prime Office AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Office 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 Prime Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Office AS has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Prime Office go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Prime Office

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to generate 0.45 times more return on investment than Prime Office. However, Sparinvest INDEX Globale is 2.23 times less risky than Prime Office. It trades about 0.12 of its potential returns per unit of risk. Prime Office AS is currently generating about -0.02 per unit of risk. If you would invest  13,764  in Sparinvest INDEX Globale on October 8, 2024 and sell it today you would earn a total of  1,298  from holding Sparinvest INDEX Globale or generate 9.43% return on investment over 90 days.

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

Sparinvest INDEX Globale  vs.  Prime Office AS

Sparinvest INDEX Globale

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 7 (%) 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.

Prime Office AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Office AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Prime Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sparinvest INDEX and Prime Office

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

The idea behind Sparinvest INDEX Globale and Prime Office 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.