Correlation Between Codan and Acorn Energy

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

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

Diversification Opportunities for Codan and Acorn Energy

-0.52

Correlation Coefficient

Codan  Acorn Energy

Excellent diversification

The 3 months correlation between Codan and Acorn is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Codan Limited and Acorn Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acorn Energy and Codan 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 Codan Limited are associated (or correlated) with Acorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acorn Energy has no effect on the direction of Codan i.e., Codan and Acorn Energy go up and down completely randomly.

Pair Corralation between Codan and Acorn Energy

If you would invest  29.00  in Acorn Energy on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Acorn Energy or generate 0.0% return on investment over 90 days.

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

Codan Limited  vs.  Acorn Energy

Codan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Codan Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Codan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Acorn Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acorn Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Acorn Energy is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Codan and Acorn Energy

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

The idea behind Codan Limited and Acorn Energy 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.