Correlation Between Nidaros Sparebank and Aega ASA

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

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

Diversification Opportunities for Nidaros Sparebank and Aega ASA

0.33

Correlation Coefficient

Nidaros Sparebank  Aega ASA

Weak diversification

The 3 months correlation between Nidaros and Aega is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nidaros Sparebank and Aega ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aega ASA and Nidaros 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 Nidaros Sparebank are associated (or correlated) with Aega ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aega ASA has no effect on the direction of Nidaros Sparebank i.e., Nidaros Sparebank and Aega ASA go up and down completely randomly.

Pair Corralation between Nidaros Sparebank and Aega ASA

Assuming the 90 days trading horizon Nidaros Sparebank is expected to generate 110.73 times less return on investment than Aega ASA. But when comparing it to its historical volatility, Nidaros Sparebank is 32.48 times less risky than Aega ASA. It trades about 0.04 of its potential returns per unit of risk. Aega ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Aega ASA on September 16, 2024 and sell it today you would earn a total of  46.00  from holding Aega ASA or generate 115.0% return on investment over 90 days.

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

Nidaros Sparebank  vs.  Aega ASA

Nidaros Sparebank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nidaros Sparebank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Nidaros Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aega ASA

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Nidaros Sparebank and Aega ASA

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

The idea behind Nidaros Sparebank and Aega 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.