Correlation Between Bien Sparebank and Nidaros Sparebank

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

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

Diversification Opportunities for Bien Sparebank and Nidaros Sparebank

0.07

Correlation Coefficient

Bien Sparebank  Nidaros Sparebank

Significant diversification

The 3 months correlation between Bien and Nidaros is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bien Sparebank ASA and Nidaros Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidaros Sparebank and Bien 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 Bien Sparebank ASA are associated (or correlated) with Nidaros Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidaros Sparebank has no effect on the direction of Bien Sparebank i.e., Bien Sparebank and Nidaros Sparebank go up and down completely randomly.

Pair Corralation between Bien Sparebank and Nidaros Sparebank

Assuming the 90 days trading horizon Bien Sparebank ASA is expected to generate 1.5 times more return on investment than Nidaros Sparebank. However, Bien Sparebank is 1.5 times more volatile than Nidaros Sparebank. It trades about 0.24 of its potential returns per unit of risk. Nidaros Sparebank is currently generating about 0.04 per unit of risk. If you would invest  9,400  in Bien Sparebank ASA on September 17, 2024 and sell it today you would earn a total of  2,900  from holding Bien Sparebank ASA or generate 30.85% return on investment over 90 days.

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

Bien Sparebank ASA  vs.  Nidaros Sparebank

Bien Sparebank ASA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bien Sparebank ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Bien Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nidaros Sparebank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nidaros Sparebank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Nidaros 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 Bien Sparebank and Nidaros Sparebank

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

The idea behind Bien Sparebank ASA and Nidaros 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.