Correlation Between Vow Green and Sparebank

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

By analyzing existing cross correlation between Vow Green Metals and Sparebank 1 SMN, you can compare the effects of market volatilities on Vow Green and Sparebank 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 Vow Green with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vow Green and Sparebank.

Diversification Opportunities for Vow Green and Sparebank

-0.46

Correlation Coefficient

Vow Green  Sparebank

Very good diversification

The 3 months correlation between Vow and Sparebank is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vow Green Metals and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Vow Green 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 Vow Green Metals are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SMN has no effect on the direction of Vow Green i.e., Vow Green and Sparebank go up and down completely randomly.

Pair Corralation between Vow Green and Sparebank

Assuming the 90 days trading horizon Vow Green Metals is expected to generate 5.54 times more return on investment than Sparebank. However, Vow Green is 5.54 times more volatile than Sparebank 1 SMN. It trades about 0.08 of its potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.2 per unit of risk. If you would invest  63.00  in Vow Green Metals on September 17, 2024 and sell it today you would earn a total of  11.00  from holding Vow Green Metals or generate 17.46% return on investment over 90 days.

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

Vow Green Metals  vs.  Sparebank 1 SMN

Vow Green Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vow Green Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Vow Green disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sparebank 1 SMN

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 15 (%) 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.

Pair Trading with Vow Green and Sparebank

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

The idea behind Vow Green Metals and Sparebank 1 SMN 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.