Correlation Between Sparebank and Akva

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

By analyzing existing cross correlation between Sparebank 1 SR and Akva Group, you can compare the effects of market volatilities on Sparebank and Akva 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 Akva. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Akva.

Diversification Opportunities for Sparebank and Akva

0.92

Correlation Coefficient

Sparebank  Akva

Almost no diversification

The 3 months correlation between Sparebank and Akva is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Akva Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akva Group 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 SR are associated (or correlated) with Akva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akva Group has no effect on the direction of Sparebank i.e., Sparebank and Akva go up and down completely randomly.

Pair Corralation between Sparebank and Akva

Assuming the 90 days trading horizon Sparebank is expected to generate 1.42 times less return on investment than Akva. But when comparing it to its historical volatility, Sparebank 1 SR is 1.65 times less risky than Akva. It trades about 0.15 of its potential returns per unit of risk. Akva Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,820  in Akva Group on September 26, 2024 and sell it today you would earn a total of  920.00  from holding Akva Group or generate 15.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	75.0%
Values	Daily Returns

Sparebank 1 SR  vs.  Akva Group

Sparebank 1 SR

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sparebank 1 SR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very conflicting basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Akva Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Akva Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Akva disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparebank and Akva

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

The idea behind Sparebank 1 SR and Akva Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.