Correlation Between Baltic Sea and Jaeren Sparebank

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

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

Diversification Opportunities for Baltic Sea and Jaeren Sparebank

0.21

Correlation Coefficient

Baltic Sea  Jaeren Sparebank

Modest diversification

The 3 months correlation between Baltic and Jaeren is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Baltic Sea Properties and Jaeren Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaeren Sparebank and Baltic Sea 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 Baltic Sea Properties are associated (or correlated) with Jaeren Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaeren Sparebank has no effect on the direction of Baltic Sea i.e., Baltic Sea and Jaeren Sparebank go up and down completely randomly.

Pair Corralation between Baltic Sea and Jaeren Sparebank

Assuming the 90 days trading horizon Baltic Sea is expected to generate 1.56 times less return on investment than Jaeren Sparebank. In addition to that, Baltic Sea is 2.03 times more volatile than Jaeren Sparebank. It trades about 0.02 of its total potential returns per unit of risk. Jaeren Sparebank is currently generating about 0.08 per unit of volatility. If you would invest  30,800  in Jaeren Sparebank on September 15, 2024 and sell it today you would earn a total of  1,800  from holding Jaeren Sparebank or generate 5.84% return on investment over 90 days.

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

Baltic Sea Properties  vs.  Jaeren Sparebank

Baltic Sea Properties

Risk-Adjusted Performance

1 of 100

Weak

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

Jaeren Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jaeren Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Jaeren 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 Baltic Sea and Jaeren Sparebank

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

The idea behind Baltic Sea Properties and Jaeren 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 Global Correlations module to find global opportunities by holding instruments from different markets.