Correlation Between Arendals Fossekompani and Selvaag Bolig

Can any of the company-specific risk be diversified away by investing in both Arendals Fossekompani and Selvaag Bolig 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 Selvaag Bolig 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 Selvaag Bolig ASA, you can compare the effects of market volatilities on Arendals Fossekompani and Selvaag Bolig 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 Selvaag Bolig. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arendals Fossekompani and Selvaag Bolig.

Diversification Opportunities for Arendals Fossekompani and Selvaag Bolig

0.13

Correlation Coefficient

Arendals Fossekompani  Selvaag Bolig

Average diversification

The 3 months correlation between Arendals and Selvaag is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Arendals Fossekompani ASA and Selvaag Bolig ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selvaag Bolig ASA 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 Selvaag Bolig. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selvaag Bolig ASA has no effect on the direction of Arendals Fossekompani i.e., Arendals Fossekompani and Selvaag Bolig go up and down completely randomly.

Pair Corralation between Arendals Fossekompani and Selvaag Bolig

Assuming the 90 days trading horizon Arendals Fossekompani ASA is expected to under-perform the Selvaag Bolig. In addition to that, Arendals Fossekompani is 1.19 times more volatile than Selvaag Bolig ASA. It trades about -0.11 of its total potential returns per unit of risk. Selvaag Bolig ASA is currently generating about 0.02 per unit of volatility. If you would invest  3,525  in Selvaag Bolig ASA on September 25, 2024 and sell it today you would earn a total of  40.00  from holding Selvaag Bolig ASA or generate 1.13% return on investment over 90 days.

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

Arendals Fossekompani ASA  vs.  Selvaag Bolig ASA

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.

Selvaag Bolig ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selvaag Bolig ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Selvaag Bolig is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arendals Fossekompani and Selvaag Bolig

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

The idea behind Arendals Fossekompani ASA and Selvaag Bolig ASA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.