Correlation Between Horisont Energi and Sunndal Sparebank

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

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

Diversification Opportunities for Horisont Energi and Sunndal Sparebank

-0.64

Correlation Coefficient

Horisont Energi  Sunndal Sparebank

Excellent diversification

The 3 months correlation between Horisont and Sunndal is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Horisont Energi AS and Sunndal Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunndal Sparebank and Horisont Energi 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 Horisont Energi AS are associated (or correlated) with Sunndal Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunndal Sparebank has no effect on the direction of Horisont Energi i.e., Horisont Energi and Sunndal Sparebank go up and down completely randomly.

Pair Corralation between Horisont Energi and Sunndal Sparebank

Assuming the 90 days trading horizon Horisont Energi AS is expected to under-perform the Sunndal Sparebank. In addition to that, Horisont Energi is 3.29 times more volatile than Sunndal Sparebank. It trades about -0.26 of its total potential returns per unit of risk. Sunndal Sparebank is currently generating about 0.07 per unit of volatility. If you would invest  11,794  in Sunndal Sparebank on September 22, 2024 and sell it today you would earn a total of  206.00  from holding Sunndal Sparebank or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Horisont Energi AS  vs.  Sunndal Sparebank

Horisont Energi AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horisont Energi AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sunndal Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sunndal Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sunndal Sparebank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Horisont Energi and Sunndal Sparebank

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

The idea behind Horisont Energi AS and Sunndal 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.