Correlation Between SpareBank and Horisont Energi

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

By analyzing existing cross correlation between SpareBank 1 stlandet and Horisont Energi AS, you can compare the effects of market volatilities on SpareBank and Horisont Energi 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 SpareBank with a short position of Horisont Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of SpareBank and Horisont Energi.

Diversification Opportunities for SpareBank and Horisont Energi

-0.57

Correlation Coefficient

SpareBank  Horisont Energi

Excellent diversification

The 3 months correlation between SpareBank and Horisont is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SpareBank 1 stlandet and Horisont Energi AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horisont Energi AS and 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 SpareBank 1 stlandet are associated (or correlated) with Horisont Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horisont Energi AS has no effect on the direction of SpareBank i.e., SpareBank and Horisont Energi go up and down completely randomly.

Pair Corralation between SpareBank and Horisont Energi

Assuming the 90 days trading horizon SpareBank 1 stlandet is expected to generate 0.35 times more return on investment than Horisont Energi. However, SpareBank 1 stlandet is 2.87 times less risky than Horisont Energi. It trades about 0.06 of its potential returns per unit of risk. Horisont Energi AS is currently generating about -0.2 per unit of risk. If you would invest  14,668  in SpareBank 1 stlandet on September 22, 2024 and sell it today you would earn a total of  720.00  from holding SpareBank 1 stlandet or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

SpareBank 1 stlandet  vs.  Horisont Energi AS

SpareBank 1 stlandet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 stlandet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SpareBank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Horisont Energi AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horisont Energi AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential 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 SpareBank and Horisont Energi

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

The idea behind SpareBank 1 stlandet and Horisont Energi 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.