Correlation Between Aurskog Sparebank and Sogn Sparebank

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

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

Diversification Opportunities for Aurskog Sparebank and Sogn Sparebank

0.44

Correlation Coefficient

Aurskog Sparebank  Sogn Sparebank

Very weak diversification

The 3 months correlation between Aurskog and Sogn is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aurskog Sparebank and Sogn Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sogn Sparebank and Aurskog Sparebank 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 Aurskog Sparebank are associated (or correlated) with Sogn Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sogn Sparebank has no effect on the direction of Aurskog Sparebank i.e., Aurskog Sparebank and Sogn Sparebank go up and down completely randomly.

Pair Corralation between Aurskog Sparebank and Sogn Sparebank

Assuming the 90 days trading horizon Aurskog Sparebank is expected to generate 3.88 times less return on investment than Sogn Sparebank. But when comparing it to its historical volatility, Aurskog Sparebank is 2.41 times less risky than Sogn Sparebank. It trades about 0.05 of its potential returns per unit of risk. Sogn Sparebank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,565  in Sogn Sparebank on September 13, 2024 and sell it today you would earn a total of  12,250  from holding Sogn Sparebank or generate 105.92% return on investment over 90 days.

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

Aurskog Sparebank  vs.  Sogn Sparebank

Aurskog Sparebank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurskog Sparebank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Aurskog Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sogn Sparebank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sogn Sparebank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sogn Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurskog Sparebank and Sogn Sparebank

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

The idea behind Aurskog Sparebank and Sogn 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.