Correlation Between Skue Sparebank and Otovo AS

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

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

Diversification Opportunities for Skue Sparebank and Otovo AS

-0.34

Correlation Coefficient

Skue Sparebank  Otovo AS

Very good diversification

The 3 months correlation between Skue and Otovo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank and Otovo AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otovo AS and Skue 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 Skue Sparebank are associated (or correlated) with Otovo AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otovo AS has no effect on the direction of Skue Sparebank i.e., Skue Sparebank and Otovo AS go up and down completely randomly.

Pair Corralation between Skue Sparebank and Otovo AS

Assuming the 90 days trading horizon Skue Sparebank is expected to generate 1.62 times less return on investment than Otovo AS. But when comparing it to its historical volatility, Skue Sparebank is 4.9 times less risky than Otovo AS. It trades about 0.08 of its potential returns per unit of risk. Otovo AS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Otovo AS on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Otovo AS or generate 0.98% return on investment over 90 days.

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

Skue Sparebank  vs.  Otovo AS

Skue Sparebank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skue Sparebank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Skue Sparebank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Otovo AS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Otovo AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Otovo AS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Skue Sparebank and Otovo AS

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

The idea behind Skue Sparebank and Otovo AS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.