Correlation Between Aega ASA and Romerike Sparebank

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

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

Diversification Opportunities for Aega ASA and Romerike Sparebank

0.01

Correlation Coefficient

Aega ASA  Romerike Sparebank

Significant diversification

The 3 months correlation between Aega and Romerike is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Aega ASA and Romerike Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romerike Sparebank and Aega ASA 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 Aega ASA are associated (or correlated) with Romerike Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romerike Sparebank has no effect on the direction of Aega ASA i.e., Aega ASA and Romerike Sparebank go up and down completely randomly.

Pair Corralation between Aega ASA and Romerike Sparebank

Assuming the 90 days trading horizon Aega ASA is expected to generate 40.14 times more return on investment than Romerike Sparebank. However, Aega ASA is 40.14 times more volatile than Romerike Sparebank. It trades about 0.13 of its potential returns per unit of risk. Romerike Sparebank is currently generating about 0.09 per unit of risk. If you would invest  40.00  in Aega ASA on September 16, 2024 and sell it today you would earn a total of  46.00  from holding Aega ASA or generate 115.0% return on investment over 90 days.

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

Aega ASA  vs.  Romerike Sparebank

Aega ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aega ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Aega ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Romerike Sparebank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Romerike Sparebank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Romerike Sparebank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aega ASA and Romerike Sparebank

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

The idea behind Aega ASA and Romerike Sparebank 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.