Correlation Between Porvair Plc and Sparebank

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

By analyzing existing cross correlation between Porvair plc and Sparebank 1 SR, you can compare the effects of market volatilities on Porvair Plc and 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 Porvair Plc with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porvair Plc and Sparebank.

Diversification Opportunities for Porvair Plc and Sparebank

0.33

Correlation Coefficient

Porvair Plc  Sparebank

Weak diversification

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

Pair Corralation between Porvair Plc and Sparebank

Assuming the 90 days trading horizon Porvair Plc is expected to generate 1.44 times less return on investment than Sparebank. In addition to that, Porvair Plc is 1.62 times more volatile than Sparebank 1 SR. It trades about 0.06 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.13 per unit of volatility. If you would invest  13,200  in Sparebank 1 SR on September 3, 2024 and sell it today you would earn a total of  1,280  from holding Sparebank 1 SR or generate 9.7% return on investment over 90 days.

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

Porvair plc  vs.  Sparebank 1 SR

Porvair plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Porvair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sparebank 1 SR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Porvair Plc and Sparebank

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

The idea behind Porvair plc and Sparebank 1 SR 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.