Correlation Between Sparebanken Sor and Exxon

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

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

Diversification Opportunities for Sparebanken Sor and Exxon

0.79

Correlation Coefficient

Sparebanken Sor  Exxon

Poor diversification

The 3 months correlation between Sparebanken and Exxon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Sor and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Sparebanken Sor 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 Sparebanken Sor are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Sparebanken Sor i.e., Sparebanken Sor and Exxon go up and down completely randomly.

Pair Corralation between Sparebanken Sor and Exxon

Assuming the 90 days trading horizon Sparebanken Sor is expected to generate 0.95 times more return on investment than Exxon. However, Sparebanken Sor is 1.06 times less risky than Exxon. It trades about 0.2 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.04 per unit of risk. If you would invest  14,014  in Sparebanken Sor on January 30, 2024 and sell it today you would earn a total of  504.00  from holding Sparebanken Sor or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Sparebanken Sor  vs.  Exxon Mobil Corp

Sparebanken Sor

Risk-Adjusted Performance

6 of 100

Modest

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

Exxon Mobil Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparebanken Sor and Exxon

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

The idea behind Sparebanken Sor and Exxon Mobil Corp 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 the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..