Correlation Between Sparebank and Nordic Mining

Can any of the company-specific risk be diversified away by investing in both Sparebank and Nordic Mining 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 Nordic Mining 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 Nordic Mining ASA, you can compare the effects of market volatilities on Sparebank and Nordic Mining 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 Nordic Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Nordic Mining.

Diversification Opportunities for Sparebank and Nordic Mining

-0.58

Correlation Coefficient

Sparebank  Nordic Mining

Excellent diversification

The 3 months correlation between Sparebank and Nordic is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Nordic Mining ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Mining ASA 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 Nordic Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Mining ASA has no effect on the direction of Sparebank i.e., Sparebank and Nordic Mining go up and down completely randomly.

Pair Corralation between Sparebank and Nordic Mining

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.44 times more return on investment than Nordic Mining. However, Sparebank 1 SMN is 2.29 times less risky than Nordic Mining. It trades about 0.2 of its potential returns per unit of risk. Nordic Mining ASA is currently generating about -0.01 per unit of risk. If you would invest  15,238  in Sparebank 1 SMN on September 17, 2024 and sell it today you would earn a total of  1,716  from holding Sparebank 1 SMN or generate 11.26% return on investment over 90 days.

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

Sparebank 1 SMN  vs.  Nordic Mining ASA

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.

Nordic Mining ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Mining ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Nordic Mining is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sparebank and Nordic Mining

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

The idea behind Sparebank 1 SMN and Nordic Mining ASA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.