Correlation Between Atlantic Sapphire and XXL ASA

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

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

Diversification Opportunities for Atlantic Sapphire and XXL ASA

0.66

Correlation Coefficient

Atlantic Sapphire  XXL ASA

Poor diversification

The 3 months correlation between Atlantic and XXL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic Sapphire As and XXL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL ASA and Atlantic Sapphire 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 Atlantic Sapphire As are associated (or correlated) with XXL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL ASA has no effect on the direction of Atlantic Sapphire i.e., Atlantic Sapphire and XXL ASA go up and down completely randomly.

Pair Corralation between Atlantic Sapphire and XXL ASA

Assuming the 90 days trading horizon Atlantic Sapphire As is expected to generate 1.86 times more return on investment than XXL ASA. However, Atlantic Sapphire is 1.86 times more volatile than XXL ASA. It trades about 0.07 of its potential returns per unit of risk. XXL ASA is currently generating about -0.09 per unit of risk. If you would invest  11.00  in Atlantic Sapphire As on September 17, 2024 and sell it today you would lose (1.48) from holding Atlantic Sapphire As or give up 13.45% of portfolio value over 90 days.

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

Atlantic Sapphire As  vs.  XXL ASA

Atlantic Sapphire

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Sapphire As are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Atlantic Sapphire disclosed solid returns over the last few months and may actually be approaching a breakup point.

XXL ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL 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 essential 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 Atlantic Sapphire and XXL ASA

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

The idea behind Atlantic Sapphire As and XXL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..