Correlation Between Edita Food and Sparebank

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

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

Diversification Opportunities for Edita Food and Sparebank

-0.42

Correlation Coefficient

Edita Food  Sparebank

Very good diversification

The 3 months correlation between Edita and Sparebank is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries 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 Edita Food 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 Edita Food Industries 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 Edita Food i.e., Edita Food and Sparebank go up and down completely randomly.

Pair Corralation between Edita Food and Sparebank

Assuming the 90 days trading horizon Edita Food Industries is expected to under-perform the Sparebank. In addition to that, Edita Food is 3.35 times more volatile than Sparebank 1 SR. It trades about -0.07 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.11 per unit of volatility. If you would invest  13,580  in Sparebank 1 SR on September 14, 2024 and sell it today you would earn a total of  960.00  from holding Sparebank 1 SR or generate 7.07% return on investment over 90 days.

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

Edita Food Industries  vs.  Sparebank 1 SR

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sparebank 1 SR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 8 (%) 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 Edita Food and Sparebank

The main advantage of trading using opposite Edita Food and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edita Food 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 Edita Food Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.