Correlation Between Sparebank and SalMar ASA

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Can any of the company-specific risk be diversified away by investing in both Sparebank and SalMar ASA 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 SalMar ASA 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 SalMar ASA, you can compare the effects of market volatilities on Sparebank and SalMar ASA 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 SalMar ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and SalMar ASA.

Diversification Opportunities for Sparebank and SalMar ASA

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sparebank and SalMar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA 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 SalMar ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalMar ASA has no effect on the direction of Sparebank i.e., Sparebank and SalMar ASA go up and down completely randomly.

Pair Corralation between Sparebank and SalMar ASA

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.58 times more return on investment than SalMar ASA. However, Sparebank 1 SMN is 1.74 times less risky than SalMar ASA. It trades about 0.05 of its potential returns per unit of risk. SalMar ASA is currently generating about -0.01 per unit of risk. If you would invest  9,114  in Sparebank 1 SMN on September 3, 2022 and sell it today you would earn a total of  2,706  from holding Sparebank 1 SMN or generate 29.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sparebank 1 SMN  vs.  SalMar ASA

 Performance (%) 
       Timeline  
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 current stock price chaos, may contribute to medium-term losses for the stakeholders.

Sparebank Price Channel

SalMar ASA 
SalMar Performance
0 of 100
Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

SalMar Price Channel

Sparebank and SalMar ASA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sparebank and SalMar ASA

The main advantage of trading using opposite Sparebank and SalMar ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, SalMar ASA 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 SalMar ASA will offset losses from the drop in SalMar ASA's long position.
The idea behind Sparebank 1 SMN and SalMar ASA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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