Correlation Between Sparinvest INDEX and Sparinvest Mellemlange

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

By analyzing existing cross correlation between Sparinvest INDEX Hj and Sparinvest Mellemlange, you can compare the effects of market volatilities on Sparinvest INDEX and Sparinvest Mellemlange 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 Sparinvest INDEX with a short position of Sparinvest Mellemlange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest INDEX and Sparinvest Mellemlange.

Diversification Opportunities for Sparinvest INDEX and Sparinvest Mellemlange

0.88

Correlation Coefficient

Sparinvest INDEX  Sparinvest Mellemlange

Very poor diversification

The 3 months correlation between Sparinvest and Sparinvest is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Hj and Sparinvest Mellemlange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest Mellemlange and Sparinvest INDEX 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 Sparinvest INDEX Hj are associated (or correlated) with Sparinvest Mellemlange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest Mellemlange has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Sparinvest Mellemlange go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Sparinvest Mellemlange

Assuming the 90 days trading horizon Sparinvest INDEX Hj is expected to generate 3.44 times more return on investment than Sparinvest Mellemlange. However, Sparinvest INDEX is 3.44 times more volatile than Sparinvest Mellemlange. It trades about 0.21 of its potential returns per unit of risk. Sparinvest Mellemlange is currently generating about 0.14 per unit of risk. If you would invest  12,315  in Sparinvest INDEX Hj on September 13, 2024 and sell it today you would earn a total of  950.00  from holding Sparinvest INDEX Hj or generate 7.71% return on investment over 90 days.

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

Sparinvest INDEX Hj  vs.  Sparinvest Mellemlange

Sparinvest INDEX

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Hj are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite quite weak technical indicators, Sparinvest INDEX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sparinvest Mellemlange

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest Mellemlange are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Sparinvest Mellemlange 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 Sparinvest INDEX and Sparinvest Mellemlange

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

The idea behind Sparinvest INDEX Hj and Sparinvest Mellemlange 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.