Correlation Between Gamma Communications and Sparebank

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

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

Diversification Opportunities for Gamma Communications and Sparebank

-0.25

Correlation Coefficient

Gamma Communications  Sparebank

Very good diversification

The 3 months correlation between Gamma and Sparebank is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC 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 Gamma Communications 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 Gamma Communications PLC 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 Gamma Communications i.e., Gamma Communications and Sparebank go up and down completely randomly.

Pair Corralation between Gamma Communications and Sparebank

Assuming the 90 days trading horizon Gamma Communications PLC is expected to under-perform the Sparebank. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications PLC is 1.36 times less risky than Sparebank. The stock trades about -0.02 of its potential returns per unit of risk. The Sparebank 1 SR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  14,540  in Sparebank 1 SR on September 1, 2024 and sell it today you would lose (60.00) from holding Sparebank 1 SR or give up 0.41% of portfolio value over 90 days.

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

Gamma Communications PLC  vs.  Sparebank 1 SR

Gamma Communications PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gamma Communications PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gamma Communications may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sparebank 1 SR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Gamma Communications and Sparebank

The main advantage of trading using opposite Gamma Communications and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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 Gamma Communications PLC 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.