Correlation Between Sparinvest INDEX and Risma Systems

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

Diversification Opportunities for Sparinvest INDEX and Risma Systems

0.14

Correlation Coefficient

Sparinvest INDEX  Risma Systems

Average diversification

The 3 months correlation between Sparinvest and Risma is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Risma Systems AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Risma Systems 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 Risma Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Risma Systems AS has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Risma Systems go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Risma Systems

Assuming the 90 days trading horizon Sparinvest INDEX is expected to generate 3.66 times less return on investment than Risma Systems. But when comparing it to its historical volatility, Sparinvest INDEX Globale is 7.25 times less risky than Risma Systems. It trades about 0.07 of its potential returns per unit of risk. Risma Systems AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Risma Systems AS on October 23, 2024 and sell it today you would earn a total of  175.00  from holding Risma Systems AS or generate 32.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sparinvest INDEX Globale  vs.  Risma Systems AS

Sparinvest INDEX Globale

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 3 (%) 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.

Risma Systems AS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Risma Systems AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Risma Systems exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparinvest INDEX and Risma Systems

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

The idea behind Sparinvest INDEX Globale and Risma Systems 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.