Correlation Between Sparebank and Salmon Evolution

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

Diversification Opportunities for Sparebank and Salmon Evolution

-0.01

Correlation Coefficient

Sparebank  Salmon Evolution

Good diversification

The 3 months correlation between Sparebank and Salmon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Salmon Evolution Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salmon Evolution Holding 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 Salmon Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salmon Evolution Holding has no effect on the direction of Sparebank i.e., Sparebank and Salmon Evolution go up and down completely randomly.

Pair Corralation between Sparebank and Salmon Evolution

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.56 times more return on investment than Salmon Evolution. However, Sparebank 1 SMN is 1.8 times less risky than Salmon Evolution. It trades about 0.13 of its potential returns per unit of risk. Salmon Evolution Holding is currently generating about 0.04 per unit of risk. If you would invest  15,400  in Sparebank 1 SMN on September 5, 2024 and sell it today you would earn a total of  1,100  from holding Sparebank 1 SMN or generate 7.14% return on investment over 90 days.

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

Sparebank 1 SMN  vs.  Salmon Evolution Holding

Sparebank 1 SMN

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 10 (%) 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.

Salmon Evolution Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Salmon Evolution Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Salmon Evolution is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sparebank and Salmon Evolution

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

The idea behind Sparebank 1 SMN and Salmon Evolution Holding 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.