Correlation Between XXL ASA and Sparebanken Vest

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

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

Diversification Opportunities for XXL ASA and Sparebanken Vest

-0.66

Correlation Coefficient

XXL ASA  Sparebanken Vest

Excellent diversification

The 3 months correlation between XXL and Sparebanken is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Sparebanken Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Vest and XXL ASA 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 XXL ASA are associated (or correlated) with Sparebanken Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Vest has no effect on the direction of XXL ASA i.e., XXL ASA and Sparebanken Vest go up and down completely randomly.

Pair Corralation between XXL ASA and Sparebanken Vest

Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Sparebanken Vest. In addition to that, XXL ASA is 9.75 times more volatile than Sparebanken Vest. It trades about -0.19 of its total potential returns per unit of risk. Sparebanken Vest is currently generating about 0.06 per unit of volatility. If you would invest  12,662  in Sparebanken Vest on September 13, 2024 and sell it today you would earn a total of  488.00  from holding Sparebanken Vest or generate 3.85% return on investment over 90 days.

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

XXL ASA  vs.  Sparebanken Vest

XXL ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL ASA 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 essential 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.

Sparebanken Vest

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Vest are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Sparebanken Vest 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 XXL ASA and Sparebanken Vest

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

The idea behind XXL ASA and Sparebanken Vest 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.