Correlation Between Sogn Sparebank and Sparebanken Sor

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

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

Diversification Opportunities for Sogn Sparebank and Sparebanken Sor

0.15

Correlation Coefficient

Sogn Sparebank  Sparebanken Sor

Average diversification

The 3 months correlation between Sogn and Sparebanken is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sogn Sparebank and Sparebanken Sor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Sor and Sogn 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 Sogn Sparebank are associated (or correlated) with Sparebanken Sor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Sor has no effect on the direction of Sogn Sparebank i.e., Sogn Sparebank and Sparebanken Sor go up and down completely randomly.

Pair Corralation between Sogn Sparebank and Sparebanken Sor

Assuming the 90 days trading horizon Sogn Sparebank is expected to generate 2.15 times more return on investment than Sparebanken Sor. However, Sogn Sparebank is 2.15 times more volatile than Sparebanken Sor. It trades about 0.19 of its potential returns per unit of risk. Sparebanken Sor is currently generating about 0.01 per unit of risk. If you would invest  20,100  in Sogn Sparebank on September 3, 2024 and sell it today you would earn a total of  6,295  from holding Sogn Sparebank or generate 31.32% return on investment over 90 days.

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

Sogn Sparebank  vs.  Sparebanken Sor

Sogn Sparebank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sogn Sparebank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sogn Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sparebanken Sor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparebanken Sor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sparebanken Sor is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sogn Sparebank and Sparebanken Sor

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

The idea behind Sogn Sparebank and Sparebanken Sor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.