Correlation Between Sparebank and 5Th Planet

Can any of the company-specific risk be diversified away by investing in both Sparebank and 5Th Planet 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 Sparebank and 5Th Planet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparebank 1 SMN and 5Th Planet Games, you can compare the effects of market volatilities on Sparebank and 5Th Planet 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 Sparebank with a short position of 5Th Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and 5Th Planet.

Diversification Opportunities for Sparebank and 5Th Planet

-0.64

Correlation Coefficient

Sparebank  5Th Planet

Excellent diversification

The 3 months correlation between Sparebank and 5Th is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and 5Th Planet Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5Th Planet Games and 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 Sparebank 1 SMN are associated (or correlated) with 5Th Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5Th Planet Games has no effect on the direction of Sparebank i.e., Sparebank and 5Th Planet go up and down completely randomly.

Pair Corralation between Sparebank and 5Th Planet

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.25 times more return on investment than 5Th Planet. However, Sparebank 1 SMN is 4.06 times less risky than 5Th Planet. It trades about 0.19 of its potential returns per unit of risk. 5Th Planet Games is currently generating about -0.09 per unit of risk. If you would invest  15,272  in Sparebank 1 SMN on September 16, 2024 and sell it today you would earn a total of  1,682  from holding Sparebank 1 SMN or generate 11.01% return on investment over 90 days.

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

Sparebank 1 SMN  vs.  5Th Planet Games

Sparebank 1 SMN

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

5Th Planet Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5Th Planet Games 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 technical and fundamental 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.

Pair Trading with Sparebank and 5Th Planet

The main advantage of trading using opposite Sparebank and 5Th Planet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, 5Th Planet 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 5Th Planet will offset losses from the drop in 5Th Planet's long position.

The idea behind Sparebank 1 SMN and 5Th Planet Games 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.