Correlation Between SpareBank and Odfjell Technology

Can any of the company-specific risk be diversified away by investing in both SpareBank and Odfjell Technology 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 Odfjell Technology 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 Odfjell Technology, you can compare the effects of market volatilities on SpareBank and Odfjell Technology 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 Odfjell Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SpareBank and Odfjell Technology.

Diversification Opportunities for SpareBank and Odfjell Technology

-0.13

Correlation Coefficient

SpareBank  Odfjell Technology

Good diversification

The 3 months correlation between SpareBank and Odfjell is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SpareBank 1 stlandet and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology 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 Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of SpareBank i.e., SpareBank and Odfjell Technology go up and down completely randomly.

Pair Corralation between SpareBank and Odfjell Technology

Assuming the 90 days trading horizon SpareBank 1 stlandet is expected to generate 0.59 times more return on investment than Odfjell Technology. However, SpareBank 1 stlandet is 1.68 times less risky than Odfjell Technology. It trades about 0.11 of its potential returns per unit of risk. Odfjell Technology is currently generating about -0.04 per unit of risk. If you would invest  14,280  in SpareBank 1 stlandet on September 26, 2024 and sell it today you would earn a total of  1,198  from holding SpareBank 1 stlandet or generate 8.39% return on investment over 90 days.

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

SpareBank 1 stlandet  vs.  Odfjell Technology

SpareBank 1 stlandet

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 stlandet are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, SpareBank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Odfjell Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odfjell Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Odfjell Technology 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 SpareBank and Odfjell Technology

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

The idea behind SpareBank 1 stlandet and Odfjell Technology 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.