Correlation Between Spar Nord and Schouw

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

Diversification Opportunities for Spar Nord and Schouw

0.6

Correlation Coefficient

Spar Nord  Schouw

Poor diversification

The 3 months correlation between Spar and Schouw is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw 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 Schouw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schouw has no effect on the direction of Spar Nord i.e., Spar Nord and Schouw go up and down completely randomly.

Pair Corralation between Spar Nord and Schouw

Assuming the 90 days trading horizon Spar Nord is expected to generate 23.33 times less return on investment than Schouw. But when comparing it to its historical volatility, Spar Nord Bank is 3.37 times less risky than Schouw. It trades about 0.04 of its potential returns per unit of risk. Schouw Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  53,700  in Schouw Co on December 27, 2024 and sell it today you would earn a total of  10,100  from holding Schouw Co or generate 18.81% 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.  Schouw Co

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.

Schouw

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schouw Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Schouw displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spar Nord and Schouw

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

The idea behind Spar Nord Bank and Schouw Co 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.