Correlation Between Sparebank and Byggma

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

Diversification Opportunities for Sparebank and Byggma

-0.83

Correlation Coefficient

Sparebank  Byggma

Pay attention - limited upside

The 3 months correlation between Sparebank and Byggma is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma 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 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 Sparebank i.e., Sparebank and Byggma go up and down completely randomly.

Pair Corralation between Sparebank and Byggma

Assuming the 90 days trading horizon Sparebank 1 SR is expected to under-perform the Byggma. But the stock apears to be less risky and, when comparing its historical volatility, Sparebank 1 SR is 2.3 times less risky than Byggma. The stock trades about -0.27 of its potential returns per unit of risk. The Byggma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Byggma on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Byggma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	27.27%
Values	Daily Returns

Sparebank 1 SR  vs.  Byggma

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.

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 Sparebank and Byggma

The main advantage of trading using opposite Sparebank and Byggma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank 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 Sparebank 1 SR 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.