Correlation Between Sparebanken Ost and SpareBank

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

By analyzing existing cross correlation between Sparebanken Ost and SpareBank 1 stlandet, you can compare the effects of market volatilities on Sparebanken Ost and SpareBank 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 Sparebanken Ost with a short position of SpareBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebanken Ost and SpareBank.

Diversification Opportunities for Sparebanken Ost and SpareBank

0.73

Correlation Coefficient

Sparebanken Ost  SpareBank

Poor diversification

The 3 months correlation between Sparebanken and SpareBank is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Ost and SpareBank 1 stlandet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 stlandet and Sparebanken Ost 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 Sparebanken Ost are associated (or correlated) with SpareBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpareBank 1 stlandet has no effect on the direction of Sparebanken Ost i.e., Sparebanken Ost and SpareBank go up and down completely randomly.

Pair Corralation between Sparebanken Ost and SpareBank

Assuming the 90 days trading horizon Sparebanken Ost is expected to generate 1.16 times more return on investment than SpareBank. However, Sparebanken Ost is 1.16 times more volatile than SpareBank 1 stlandet. It trades about 0.09 of its potential returns per unit of risk. SpareBank 1 stlandet is currently generating about 0.07 per unit of risk. If you would invest  6,050  in Sparebanken Ost on September 3, 2024 and sell it today you would earn a total of  460.00  from holding Sparebanken Ost or generate 7.6% return on investment over 90 days.

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

Sparebanken Ost  vs.  SpareBank 1 stlandet

Sparebanken Ost

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SpareBank 1 stlandet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 stlandet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SpareBank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sparebanken Ost and SpareBank

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

The idea behind Sparebanken Ost and SpareBank 1 stlandet 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.