Correlation Between Sparebanken Mre and Grong Sparebank

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

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

Diversification Opportunities for Sparebanken Mre and Grong Sparebank

0.56

Correlation Coefficient

Sparebanken Mre  Grong Sparebank

Very weak diversification

The 3 months correlation between Sparebanken and Grong is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Mre and Grong Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grong Sparebank 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 Grong Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grong Sparebank has no effect on the direction of Sparebanken Mre i.e., Sparebanken Mre and Grong Sparebank go up and down completely randomly.

Pair Corralation between Sparebanken Mre and Grong Sparebank

Assuming the 90 days trading horizon Sparebanken Mre is expected to generate 1.13 times more return on investment than Grong Sparebank. However, Sparebanken Mre is 1.13 times more volatile than Grong Sparebank. It trades about 0.09 of its potential returns per unit of risk. Grong Sparebank is currently generating about 0.04 per unit of risk. If you would invest  8,350  in Sparebanken Mre on September 5, 2024 and sell it today you would earn a total of  592.00  from holding Sparebanken Mre or generate 7.09% return on investment over 90 days.

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

Sparebanken Mre  vs.  Grong Sparebank

Sparebanken Mre

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Mre are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Mre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grong Sparebank

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Sparebanken Mre and Grong Sparebank

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

The idea behind Sparebanken Mre and Grong Sparebank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.