Correlation Between EAM Solar and Arendals Fossekompani
Can any of the company-specific risk be diversified away by investing in both EAM Solar and Arendals Fossekompani 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 EAM Solar and Arendals Fossekompani into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAM Solar ASA and Arendals Fossekompani ASA, you can compare the effects of market volatilities on EAM Solar and Arendals Fossekompani 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 EAM Solar with a short position of Arendals Fossekompani. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAM Solar and Arendals Fossekompani.
Diversification Opportunities for EAM Solar and Arendals Fossekompani
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EAM and Arendals is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding EAM Solar ASA and Arendals Fossekompani ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arendals Fossekompani ASA and EAM Solar 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 EAM Solar ASA are associated (or correlated) with Arendals Fossekompani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arendals Fossekompani ASA has no effect on the direction of EAM Solar i.e., EAM Solar and Arendals Fossekompani go up and down completely randomly.
Pair Corralation between EAM Solar and Arendals Fossekompani
Assuming the 90 days trading horizon EAM Solar ASA is expected to under-perform the Arendals Fossekompani. In addition to that, EAM Solar is 2.22 times more volatile than Arendals Fossekompani ASA. It trades about -0.16 of its total potential returns per unit of risk. Arendals Fossekompani ASA is currently generating about 0.42 per unit of volatility. If you would invest 14,840 in Arendals Fossekompani ASA on December 29, 2023 and sell it today you would earn a total of 3,420 from holding Arendals Fossekompani ASA or generate 23.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
EAM Solar ASA vs. Arendals Fossekompani ASA
Performance |
Timeline |
EAM Solar ASA |
Arendals Fossekompani ASA |
EAM Solar and Arendals Fossekompani Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EAM Solar and Arendals Fossekompani
The main advantage of trading using opposite EAM Solar and Arendals Fossekompani positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAM Solar position performs unexpectedly, Arendals Fossekompani 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 Arendals Fossekompani will offset losses from the drop in Arendals Fossekompani's long position.EAM Solar vs. Yara International ASA | EAM Solar vs. Equinor ASA | EAM Solar vs. Aker ASA | EAM Solar vs. Austevoll Seafood ASA |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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