Correlation Between Jaeren Sparebank and Sparebanken Mre

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

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

Diversification Opportunities for Jaeren Sparebank and Sparebanken Mre

0.6

Correlation Coefficient

Jaeren Sparebank  Sparebanken Mre

Poor diversification

The 3 months correlation between Jaeren and Sparebanken is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Jaeren Sparebank and Sparebanken Mre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Mre and Jaeren 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 Jaeren Sparebank are associated (or correlated) with Sparebanken Mre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Mre has no effect on the direction of Jaeren Sparebank i.e., Jaeren Sparebank and Sparebanken Mre go up and down completely randomly.

Pair Corralation between Jaeren Sparebank and Sparebanken Mre

Assuming the 90 days trading horizon Jaeren Sparebank is expected to generate 1.22 times less return on investment than Sparebanken Mre. But when comparing it to its historical volatility, Jaeren Sparebank is 1.04 times less risky than Sparebanken Mre. It trades about 0.08 of its potential returns per unit of risk. Sparebanken Mre is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,420  in Sparebanken Mre on September 13, 2024 and sell it today you would earn a total of  600.00  from holding Sparebanken Mre or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Jaeren Sparebank  vs.  Sparebanken Mre

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.

Sparebanken Mre

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Mre are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Mre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jaeren Sparebank and Sparebanken Mre

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

The idea behind Jaeren Sparebank and Sparebanken Mre 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.