Correlation Between Beerenberg and Morrow Bank

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

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

Diversification Opportunities for Beerenberg and Morrow Bank

0.53

Correlation Coefficient

Beerenberg  Morrow Bank

Very weak diversification

The 3 months correlation between Beerenberg and Morrow is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Beerenberg AS and Morrow Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morrow Bank ASA and Beerenberg 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 Beerenberg AS are associated (or correlated) with Morrow Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morrow Bank ASA has no effect on the direction of Beerenberg i.e., Beerenberg and Morrow Bank go up and down completely randomly.

Pair Corralation between Beerenberg and Morrow Bank

Assuming the 90 days trading horizon Beerenberg AS is expected to under-perform the Morrow Bank. But the stock apears to be less risky and, when comparing its historical volatility, Beerenberg AS is 8.81 times less risky than Morrow Bank. The stock trades about -0.16 of its potential returns per unit of risk. The Morrow Bank ASA is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  660.00  in Morrow Bank ASA on September 4, 2024 and sell it today you would earn a total of  176.00  from holding Morrow Bank ASA or generate 26.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Beerenberg AS  vs.  Morrow Bank ASA

Beerenberg AS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beerenberg AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Beerenberg is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Morrow Bank ASA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morrow Bank ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Morrow Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beerenberg and Morrow Bank

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

The idea behind Beerenberg AS and Morrow Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .