Correlation Between Andfjord Salmon and Melhus Sparebank

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

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

Diversification Opportunities for Andfjord Salmon and Melhus Sparebank

0.65

Correlation Coefficient

Andfjord Salmon  Melhus Sparebank

Poor diversification

The 3 months correlation between Andfjord and Melhus is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Andfjord Salmon AS and Melhus Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melhus Sparebank and Andfjord Salmon 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 Andfjord Salmon AS are associated (or correlated) with Melhus Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melhus Sparebank has no effect on the direction of Andfjord Salmon i.e., Andfjord Salmon and Melhus Sparebank go up and down completely randomly.

Pair Corralation between Andfjord Salmon and Melhus Sparebank

Assuming the 90 days trading horizon Andfjord Salmon AS is expected to generate 3.54 times more return on investment than Melhus Sparebank. However, Andfjord Salmon is 3.54 times more volatile than Melhus Sparebank. It trades about 0.34 of its potential returns per unit of risk. Melhus Sparebank is currently generating about -0.03 per unit of risk. If you would invest  3,280  in Andfjord Salmon AS on August 30, 2024 and sell it today you would earn a total of  740.00  from holding Andfjord Salmon AS or generate 22.56% return on investment over 90 days.

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

Andfjord Salmon AS  vs.  Melhus Sparebank

Andfjord Salmon AS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Andfjord Salmon AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Andfjord Salmon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Melhus Sparebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melhus Sparebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Melhus 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 Andfjord Salmon and Melhus Sparebank

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

The idea behind Andfjord Salmon AS and Melhus 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.

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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.