Correlation Between Sparebanken Ost and Byggma

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

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

Diversification Opportunities for Sparebanken Ost and Byggma

-0.83

Correlation Coefficient

Sparebanken Ost  Byggma

Pay attention - limited upside

The 3 months correlation between Sparebanken and Byggma is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Ost and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma and Sparebanken Ost 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 Ost are associated (or correlated) with Byggma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggma has no effect on the direction of Sparebanken Ost i.e., Sparebanken Ost and Byggma go up and down completely randomly.

Pair Corralation between Sparebanken Ost and Byggma

Assuming the 90 days trading horizon Sparebanken Ost is expected to generate 0.44 times more return on investment than Byggma. However, Sparebanken Ost is 2.25 times less risky than Byggma. It trades about 0.28 of its potential returns per unit of risk. Byggma is currently generating about 0.02 per unit of risk. If you would invest  6,620  in Sparebanken Ost on September 25, 2024 and sell it today you would earn a total of  570.00  from holding Sparebanken Ost or generate 8.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Sparebanken Ost  vs.  Byggma

Sparebanken Ost

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Sparebanken Ost disclosed solid returns over the last few months and may actually be approaching a breakup point.

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sparebanken Ost and Byggma

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

The idea behind Sparebanken Ost and Byggma 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.