Correlation Between Sparebanken Vest and Multiconsult

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

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

Diversification Opportunities for Sparebanken Vest and Multiconsult

0.83

Correlation Coefficient

Sparebanken Vest  Multiconsult

Very poor diversification

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

Pair Corralation between Sparebanken Vest and Multiconsult

Assuming the 90 days trading horizon Sparebanken Vest is expected to generate 1.1 times more return on investment than Multiconsult. However, Sparebanken Vest is 1.1 times more volatile than Multiconsult AS. It trades about 0.17 of its potential returns per unit of risk. Multiconsult AS is currently generating about 0.11 per unit of risk. If you would invest  12,312  in Sparebanken Vest on September 25, 2024 and sell it today you would earn a total of  1,580  from holding Sparebanken Vest or generate 12.83% return on investment over 90 days.

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

Sparebanken Vest  vs.  Multiconsult AS

Sparebanken Vest

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Vest are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Vest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Multiconsult AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multiconsult AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Multiconsult may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sparebanken Vest and Multiconsult

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

The idea behind Sparebanken Vest and Multiconsult 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.