Correlation Between Vow ASA and Totens Sparebank

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

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

Diversification Opportunities for Vow ASA and Totens Sparebank

-0.54

Correlation Coefficient

Vow ASA  Totens Sparebank

Excellent diversification

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

Pair Corralation between Vow ASA and Totens Sparebank

Assuming the 90 days trading horizon Vow ASA is expected to generate 9.48 times less return on investment than Totens Sparebank. In addition to that, Vow ASA is 2.9 times more volatile than Totens Sparebank. It trades about 0.01 of its total potential returns per unit of risk. Totens Sparebank is currently generating about 0.25 per unit of volatility. If you would invest  22,855  in Totens Sparebank on February 4, 2024 and sell it today you would earn a total of  1,345  from holding Totens Sparebank or generate 5.88% return on investment over 90 days.

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

Vow ASA  vs.  Totens Sparebank

Vow ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vow ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Totens Sparebank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Totens Sparebank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Totens Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vow ASA and Totens Sparebank

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

The idea behind Vow ASA and Totens Sparebank 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.