Correlation Between Sparebank and Austevoll Seafood

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

Diversification Opportunities for Sparebank and Austevoll Seafood

0.74

Correlation Coefficient

Sparebank  Austevoll Seafood

Poor diversification

The 3 months correlation between Sparebank and Austevoll is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SMN and Austevoll Seafood ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austevoll Seafood 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 Austevoll Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austevoll Seafood ASA has no effect on the direction of Sparebank i.e., Sparebank and Austevoll Seafood go up and down completely randomly.

Pair Corralation between Sparebank and Austevoll Seafood

Assuming the 90 days trading horizon Sparebank 1 SMN is expected to generate 0.89 times more return on investment than Austevoll Seafood. However, Sparebank 1 SMN is 1.13 times less risky than Austevoll Seafood. It trades about 0.11 of its potential returns per unit of risk. Austevoll Seafood ASA is currently generating about 0.1 per unit of risk. If you would invest  12,067  in Sparebank 1 SMN on February 5, 2024 and sell it today you would earn a total of  2,633  from holding Sparebank 1 SMN or generate 21.82% return on investment over 90 days.

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

Sparebank 1 SMN  vs.  Austevoll Seafood ASA

Sparebank 1 SMN

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SMN are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Austevoll Seafood ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Austevoll Seafood ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Austevoll Seafood disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparebank and Austevoll Seafood

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

The idea behind Sparebank 1 SMN and Austevoll Seafood 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.