Correlation Between Yara International and SpareBank

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

By analyzing existing cross correlation between Yara International ASA and SpareBank 1 Sr Norge, you can compare the effects of market volatilities on Yara International 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 Yara International with a short position of SpareBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yara International and SpareBank.

Diversification Opportunities for Yara International and SpareBank

-0.43

Correlation Coefficient

Yara International  SpareBank

Very good diversification

The 3 months correlation between Yara and SpareBank is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and SpareBank 1 Sr Norge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 Sr and Yara International 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 Yara International ASA 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 Sr has no effect on the direction of Yara International i.e., Yara International and SpareBank go up and down completely randomly.

Pair Corralation between Yara International and SpareBank

Assuming the 90 days trading horizon Yara International ASA is expected to under-perform the SpareBank. In addition to that, Yara International is 1.08 times more volatile than SpareBank 1 Sr Norge. It trades about -0.11 of its total potential returns per unit of risk. SpareBank 1 Sr Norge is currently generating about 0.11 per unit of volatility. If you would invest  13,320  in SpareBank 1 Sr Norge on September 26, 2024 and sell it today you would earn a total of  1,040  from holding SpareBank 1 Sr Norge or generate 7.81% return on investment over 90 days.

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

Yara International ASA  vs.  SpareBank 1 Sr Norge

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

SpareBank 1 Sr

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 Sr Norge are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Yara International and SpareBank

The main advantage of trading using opposite Yara International and SpareBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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 Yara International ASA and SpareBank 1 Sr Norge 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.