Correlation Between Sparebanken Mre and Akva

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

By analyzing existing cross correlation between Sparebanken Mre and Akva Group, you can compare the effects of market volatilities on Sparebanken Mre and Akva 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 Sparebanken Mre with a short position of Akva. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebanken Mre and Akva.

Diversification Opportunities for Sparebanken Mre and Akva

0.87

Correlation Coefficient

Sparebanken Mre  Akva

Very poor diversification

The 3 months correlation between Sparebanken and Akva is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Mre and Akva Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akva Group and Sparebanken Mre 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 Sparebanken Mre are associated (or correlated) with Akva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akva Group has no effect on the direction of Sparebanken Mre i.e., Sparebanken Mre and Akva go up and down completely randomly.

Pair Corralation between Sparebanken Mre and Akva

Assuming the 90 days trading horizon Sparebanken Mre is expected to generate 1.28 times less return on investment than Akva. But when comparing it to its historical volatility, Sparebanken Mre is 1.55 times less risky than Akva. It trades about 0.15 of its potential returns per unit of risk. Akva Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,820  in Akva Group on September 26, 2024 and sell it today you would earn a total of  920.00  from holding Akva Group or generate 15.81% return on investment over 90 days.

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

Sparebanken Mre  vs.  Akva Group

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.

Akva Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Akva Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Akva disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparebanken Mre and Akva

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

The idea behind Sparebanken Mre and Akva Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.