Correlation Between Trellus Health and Sparebank

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

By analyzing existing cross correlation between Trellus Health plc and Sparebank 1 SR, you can compare the effects of market volatilities on Trellus Health 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 Trellus Health with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trellus Health and Sparebank.

Diversification Opportunities for Trellus Health and Sparebank

0.59

Correlation Coefficient

Trellus Health  Sparebank

Very weak diversification

The 3 months correlation between Trellus and Sparebank is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Trellus Health plc and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and Trellus Health 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 Trellus Health plc 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 SR has no effect on the direction of Trellus Health i.e., Trellus Health and Sparebank go up and down completely randomly.

Pair Corralation between Trellus Health and Sparebank

Assuming the 90 days trading horizon Trellus Health plc is expected to generate 24.49 times more return on investment than Sparebank. However, Trellus Health is 24.49 times more volatile than Sparebank 1 SR. It trades about 0.03 of its potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.07 per unit of risk. If you would invest  850.00  in Trellus Health plc on October 24, 2024 and sell it today you would lose (590.00) from holding Trellus Health plc or give up 69.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Trellus Health plc  vs.  Sparebank 1 SR

Trellus Health plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sparebank 1 SR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Trellus Health and Sparebank

The main advantage of trading using opposite Trellus Health and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trellus Health 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 Trellus Health plc and Sparebank 1 SR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.