Correlation Between Bouvet and SmartCraft ASA

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

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

Diversification Opportunities for Bouvet and SmartCraft ASA

-0.19

Correlation Coefficient

Bouvet  SmartCraft ASA

Good diversification

The 3 months correlation between Bouvet and SmartCraft is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bouvet and SmartCraft ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartCraft ASA and Bouvet 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 Bouvet are associated (or correlated) with SmartCraft ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartCraft ASA has no effect on the direction of Bouvet i.e., Bouvet and SmartCraft ASA go up and down completely randomly.

Pair Corralation between Bouvet and SmartCraft ASA

Assuming the 90 days trading horizon Bouvet is expected to generate 1.35 times less return on investment than SmartCraft ASA. But when comparing it to its historical volatility, Bouvet is 2.11 times less risky than SmartCraft ASA. It trades about 0.06 of its potential returns per unit of risk. SmartCraft ASA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,900  in SmartCraft ASA on September 12, 2024 and sell it today you would earn a total of  120.00  from holding SmartCraft ASA or generate 4.14% return on investment over 90 days.

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

Bouvet  vs.  SmartCraft ASA

Bouvet

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bouvet are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Bouvet is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SmartCraft ASA

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Bouvet and SmartCraft ASA

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

The idea behind Bouvet and SmartCraft 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.