Correlation Between Kongsberg Gruppen and Sparebank

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

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

Diversification Opportunities for Kongsberg Gruppen and Sparebank

0.86

Correlation Coefficient

Kongsberg Gruppen  Sparebank

Very poor diversification

The 3 months correlation between Kongsberg and Sparebank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Gruppen ASA 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 Kongsberg Gruppen 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 Kongsberg Gruppen ASA 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 Kongsberg Gruppen i.e., Kongsberg Gruppen and Sparebank go up and down completely randomly.

Pair Corralation between Kongsberg Gruppen and Sparebank

Assuming the 90 days trading horizon Kongsberg Gruppen ASA is expected to generate 1.58 times more return on investment than Sparebank. However, Kongsberg Gruppen is 1.58 times more volatile than Sparebank 1 SR. It trades about 0.21 of its potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.11 per unit of risk. If you would invest  102,542  in Kongsberg Gruppen ASA on September 30, 2024 and sell it today you would earn a total of  26,858  from holding Kongsberg Gruppen ASA or generate 26.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	73.02%
Values	Daily Returns

Kongsberg Gruppen ASA  vs.  Sparebank 1 SR

Kongsberg Gruppen ASA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Gruppen ASA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Kongsberg Gruppen disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sparebank 1 SR

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Sparebank 1 SR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very conflicting basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kongsberg Gruppen and Sparebank

The main advantage of trading using opposite Kongsberg Gruppen and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kongsberg Gruppen 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 Kongsberg Gruppen ASA 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.