Correlation Between Sparebank and Circa Group

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Can any of the company-specific risk be diversified away by investing in both Sparebank and Circa Group 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 Circa Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SMN and Circa Group AS, you can compare the effects of market volatilities on Sparebank and Circa Group 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 Circa Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Circa Group.

Diversification Opportunities for Sparebank and Circa Group

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sparebank and Circa is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Circa Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Circa Group AS 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 SMN are associated (or correlated) with Circa Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Circa Group AS has no effect on the direction of Sparebank i.e., Sparebank and Circa Group go up and down completely randomly.

Pair Corralation between Sparebank and Circa Group

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.34 times more return on investment than Circa Group. However, Sparebank 1 SMN is 2.96 times less risky than Circa Group. It trades about 0.05 of its potential returns per unit of risk. Circa Group AS is currently generating about -0.03 per unit of risk. If you would invest  8,664  in Sparebank 1 SMN on September 6, 2022 and sell it today you would earn a total of  3,016  from holding Sparebank 1 SMN or generate 34.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Sparebank 1 SMN  vs.  Circa Group AS

 Performance (%) 
Sparebank 1 SMN 
Sparebank Performance
0 of 100
Over the last 90 days Sparebank 1 SMN has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Sparebank is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Sparebank Price Channel

Circa Group AS 
Circa Performance
0 of 100
Over the last 90 days Circa Group AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Circa Price Channel

Sparebank and Circa Group Volatility Contrast

   Predicted Return Density   

Pair Trading with Sparebank and Circa Group

The main advantage of trading using opposite Sparebank and Circa Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Circa Group 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 Circa Group will offset losses from the drop in Circa Group's long position.
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The idea behind Sparebank 1 SMN and Circa Group 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.
Check out your portfolio center. 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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