Correlation Between Spar Nord and Maj Invest

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

By analyzing existing cross correlation between Spar Nord Bank and Maj Invest Pension, you can compare the effects of market volatilities on Spar Nord and Maj Invest 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 Spar Nord with a short position of Maj Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spar Nord and Maj Invest.

Diversification Opportunities for Spar Nord and Maj Invest

0.66

Correlation Coefficient

Spar Nord  Maj Invest

Poor diversification

The 3 months correlation between Spar and Maj is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and Maj Invest Pension in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest Pension and Spar Nord 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 Spar Nord Bank are associated (or correlated) with Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest Pension has no effect on the direction of Spar Nord i.e., Spar Nord and Maj Invest go up and down completely randomly.

Pair Corralation between Spar Nord and Maj Invest

Assuming the 90 days trading horizon Spar Nord Bank is expected to generate 3.52 times more return on investment than Maj Invest. However, Spar Nord is 3.52 times more volatile than Maj Invest Pension. It trades about 0.11 of its potential returns per unit of risk. Maj Invest Pension is currently generating about 0.17 per unit of risk. If you would invest  12,920  in Spar Nord Bank on September 4, 2024 and sell it today you would earn a total of  1,060  from holding Spar Nord Bank or generate 8.2% return on investment over 90 days.

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

Spar Nord Bank  vs.  Maj Invest Pension

Spar Nord Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spar Nord Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Spar Nord may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Maj Invest Pension

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maj Invest Pension are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, Maj Invest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spar Nord and Maj Invest

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

The idea behind Spar Nord Bank and Maj Invest Pension 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.