Correlation Between Electromagnetic Geoservices and Avance Gas

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

By analyzing existing cross correlation between Electromagnetic Geoservices ASA and Avance Gas Holding, you can compare the effects of market volatilities on Electromagnetic Geoservices and Avance Gas 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 Electromagnetic Geoservices with a short position of Avance Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromagnetic Geoservices and Avance Gas.

Diversification Opportunities for Electromagnetic Geoservices and Avance Gas

-0.54

Correlation Coefficient

Electromagnetic Geoservices  Avance Gas

Excellent diversification

The 3 months correlation between Electromagnetic and Avance is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Electromagnetic Geoservices AS and Avance Gas Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avance Gas Holding and Electromagnetic Geoservices 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 Electromagnetic Geoservices ASA are associated (or correlated) with Avance Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avance Gas Holding has no effect on the direction of Electromagnetic Geoservices i.e., Electromagnetic Geoservices and Avance Gas go up and down completely randomly.

Pair Corralation between Electromagnetic Geoservices and Avance Gas

Assuming the 90 days trading horizon Electromagnetic Geoservices ASA is expected to under-perform the Avance Gas. But the stock apears to be less risky and, when comparing its historical volatility, Electromagnetic Geoservices ASA is 1.69 times less risky than Avance Gas. The stock trades about -0.09 of its potential returns per unit of risk. The Avance Gas Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  11,125  in Avance Gas Holding on February 4, 2024 and sell it today you would earn a total of  5,135  from holding Avance Gas Holding or generate 46.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Electromagnetic Geoservices AS  vs.  Avance Gas Holding

Electromagnetic Geoservices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electromagnetic Geoservices ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Avance Gas Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avance Gas Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Avance Gas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electromagnetic Geoservices and Avance Gas

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

The idea behind Electromagnetic Geoservices ASA and Avance Gas Holding 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.