Correlation Between Sparebanken Mre and Byggma

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

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

Diversification Opportunities for Sparebanken Mre and Byggma

-0.78

Correlation Coefficient

Sparebanken Mre  Byggma

Pay attention - limited upside

The 3 months correlation between Sparebanken and Byggma is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Mre and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma 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 Byggma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggma has no effect on the direction of Sparebanken Mre i.e., Sparebanken Mre and Byggma go up and down completely randomly.

Pair Corralation between Sparebanken Mre and Byggma

Assuming the 90 days trading horizon Sparebanken Mre is expected to generate 1.43 times less return on investment than Byggma. But when comparing it to its historical volatility, Sparebanken Mre is 2.53 times less risky than Byggma. It trades about 0.03 of its potential returns per unit of risk. Byggma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Byggma on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Byggma or generate 0.0% return on investment over 90 days.

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

Sparebanken Mre  vs.  Byggma

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.

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic 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 Sparebanken Mre and Byggma

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

The idea behind Sparebanken Mre and Byggma 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.