Correlation Between Aeorema Communications and Sparebank

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

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

Diversification Opportunities for Aeorema Communications and Sparebank

-0.72

Correlation Coefficient

Aeorema Communications  Sparebank

Pay attention - limited upside

The 3 months correlation between Aeorema and Sparebank is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications i.e., Aeorema Communications and Sparebank go up and down completely randomly.

Pair Corralation between Aeorema Communications and Sparebank

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Sparebank. In addition to that, Aeorema Communications is 1.11 times more volatile than Sparebank 1 SR. It trades about -0.09 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.13 per unit of volatility. If you would invest  13,200  in Sparebank 1 SR on September 3, 2024 and sell it today you would earn a total of  1,280  from holding Sparebank 1 SR or generate 9.7% return on investment over 90 days.

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

Aeorema Communications Plc  vs.  Sparebank 1 SR

Aeorema Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sparebank 1 SR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aeorema Communications and Sparebank

The main advantage of trading using opposite Aeorema Communications and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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 Aeorema Communications 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.