Correlation Between Federal National and Sparebank
Can any of the company-specific risk be diversified away by investing in both Federal National 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 Federal National and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal National Mortgage and Sparebank 1 SMN, you can compare the effects of market volatilities on Federal National 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 Federal National with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Sparebank.
Diversification Opportunities for Federal National and Sparebank
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and Sparebank is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN and Federal National 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 Federal National Mortgage 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 SMN has no effect on the direction of Federal National i.e., Federal National and Sparebank go up and down completely randomly.
Pair Corralation between Federal National and Sparebank
Given the investment horizon of 90 days Federal National Mortgage is expected to generate 8.28 times more return on investment than Sparebank. However, Federal National is 8.28 times more volatile than Sparebank 1 SMN. It trades about 0.16 of its potential returns per unit of risk. Sparebank 1 SMN is currently generating about 0.1 per unit of risk. If you would invest 638.00 in Federal National Mortgage on March 30, 2025 and sell it today you would earn a total of 362.00 from holding Federal National Mortgage or generate 56.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Federal National Mortgage vs. Sparebank 1 SMN
Performance |
| Timeline |
| Federal National Mortgage |
| Sparebank 1 SMN |
Federal National and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Sparebank
The main advantage of trading using opposite Federal National and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National 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.| Federal National vs. GE Vernova LLC | Federal National vs. Kenon Holdings | Federal National vs. Archrock | Federal National vs. Nextera Energy |
| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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