Correlation Between AF Gruppen and Crayon Group

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

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

Diversification Opportunities for AF Gruppen and Crayon Group

0.1

Correlation Coefficient

AF Gruppen  Crayon Group

Average diversification

The 3 months correlation between AFG and Crayon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and Crayon Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crayon Group Holding and AF Gruppen 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 AF Gruppen ASA are associated (or correlated) with Crayon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crayon Group Holding has no effect on the direction of AF Gruppen i.e., AF Gruppen and Crayon Group go up and down completely randomly.

Pair Corralation between AF Gruppen and Crayon Group

Assuming the 90 days trading horizon AF Gruppen ASA is expected to generate 0.32 times more return on investment than Crayon Group. However, AF Gruppen ASA is 3.15 times less risky than Crayon Group. It trades about 0.31 of its potential returns per unit of risk. Crayon Group Holding is currently generating about 0.08 per unit of risk. If you would invest  12,000  in AF Gruppen ASA on September 12, 2024 and sell it today you would earn a total of  2,820  from holding AF Gruppen ASA or generate 23.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AF Gruppen ASA  vs.  Crayon Group Holding

AF Gruppen ASA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AF Gruppen ASA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, AF Gruppen disclosed solid returns over the last few months and may actually be approaching a breakup point.

Crayon Group Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crayon Group Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Crayon Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AF Gruppen and Crayon Group

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

The idea behind AF Gruppen ASA and Crayon Group 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.