Correlation Between Spar Nord and Royal Unibrew

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

Diversification Opportunities for Spar Nord and Royal Unibrew

0.55

Correlation Coefficient

Spar Nord  Royal Unibrew

Very weak diversification

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

Pair Corralation between Spar Nord and Royal Unibrew

Assuming the 90 days trading horizon Spar Nord is expected to generate 7.1 times less return on investment than Royal Unibrew. But when comparing it to its historical volatility, Spar Nord Bank is 4.06 times less risky than Royal Unibrew. It trades about 0.04 of its potential returns per unit of risk. Royal Unibrew AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  50,900  in Royal Unibrew AS on December 27, 2024 and sell it today you would earn a total of  2,500  from holding Royal Unibrew AS or generate 4.91% return on investment over 90 days.

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

Spar Nord Bank  vs.  Royal Unibrew AS

Spar Nord Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spar Nord Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Spar Nord is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Royal Unibrew AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Unibrew AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Royal Unibrew is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Spar Nord and Royal Unibrew

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

The idea behind Spar Nord Bank and Royal Unibrew 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.