Correlation Between Spar Nord and Monsenso

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

Diversification Opportunities for Spar Nord and Monsenso

-0.55

Correlation Coefficient

Spar Nord  Monsenso

Excellent diversification

The 3 months correlation between Spar and Monsenso is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and Monsenso AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monsenso AS 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 Monsenso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monsenso AS has no effect on the direction of Spar Nord i.e., Spar Nord and Monsenso go up and down completely randomly.

Pair Corralation between Spar Nord and Monsenso

Assuming the 90 days trading horizon Spar Nord Bank is expected to generate 1.84 times more return on investment than Monsenso. However, Spar Nord is 1.84 times more volatile than Monsenso AS. It trades about 0.26 of its potential returns per unit of risk. Monsenso AS is currently generating about -0.02 per unit of risk. If you would invest  13,720  in Spar Nord Bank on October 5, 2024 and sell it today you would earn a total of  6,830  from holding Spar Nord Bank or generate 49.78% return on investment over 90 days.

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

Spar Nord Bank  vs.  Monsenso AS

Spar Nord Bank

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Spar Nord Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Spar Nord displayed solid returns over the last few months and may actually be approaching a breakup point.

Monsenso AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monsenso AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Spar Nord and Monsenso

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

The idea behind Spar Nord Bank and Monsenso 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.