Correlation Between Arendals Fossekompani and Byggma

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

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

Diversification Opportunities for Arendals Fossekompani and Byggma

0.75

Correlation Coefficient

Arendals Fossekompani  Byggma

Poor diversification

The 3 months correlation between Arendals and Byggma is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arendals Fossekompani ASA and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma and Arendals Fossekompani 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 Arendals Fossekompani ASA are associated (or correlated) with Byggma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggma has no effect on the direction of Arendals Fossekompani i.e., Arendals Fossekompani and Byggma go up and down completely randomly.

Pair Corralation between Arendals Fossekompani and Byggma

Assuming the 90 days trading horizon Arendals Fossekompani ASA is expected to generate 0.84 times more return on investment than Byggma. However, Arendals Fossekompani ASA is 1.2 times less risky than Byggma. It trades about -0.04 of its potential returns per unit of risk. Byggma is currently generating about -0.03 per unit of risk. If you would invest  24,990  in Arendals Fossekompani ASA on September 25, 2024 and sell it today you would lose (10,690) from holding Arendals Fossekompani ASA or give up 42.78% of portfolio value over 90 days.

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

Arendals Fossekompani ASA  vs.  Byggma

Arendals Fossekompani ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arendals Fossekompani 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Arendals Fossekompani and Byggma

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

The idea behind Arendals Fossekompani ASA and Byggma 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.