Correlation Between Melhus Sparebank and Sparebanken Mre

Can any of the company-specific risk be diversified away by investing in both Melhus 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 Melhus 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 Melhus Sparebank and Sparebanken Mre, you can compare the effects of market volatilities on Melhus 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 Melhus Sparebank with a short position of Sparebanken Mre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melhus Sparebank and Sparebanken Mre.

Diversification Opportunities for Melhus Sparebank and Sparebanken Mre

0.69

Correlation Coefficient

Melhus Sparebank  Sparebanken Mre

Poor diversification

The 3 months correlation between Melhus and Sparebanken is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Melhus Sparebank and Sparebanken Mre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Mre and Melhus 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 Melhus 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 Melhus Sparebank i.e., Melhus Sparebank and Sparebanken Mre go up and down completely randomly.

Pair Corralation between Melhus Sparebank and Sparebanken Mre

Assuming the 90 days trading horizon Melhus Sparebank is expected to under-perform the Sparebanken Mre. But the stock apears to be less risky and, when comparing its historical volatility, Melhus Sparebank is 1.42 times less risky than Sparebanken Mre. The stock trades about -0.02 of its potential returns per unit of risk. The Sparebanken Mre is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,290  in Sparebanken Mre on September 26, 2024 and sell it today you would earn a total of  55.00  from holding Sparebanken Mre or generate 0.59% return on investment over 90 days.

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

Melhus Sparebank  vs.  Sparebanken Mre

Melhus Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Melhus Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Melhus Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sparebanken Mre

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Mre are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Sparebanken Mre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Melhus Sparebank and Sparebanken Mre

The main advantage of trading using opposite Melhus Sparebank and Sparebanken Mre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melhus 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 Melhus 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.