Correlation Between ECIT AS and Bouvet

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

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

Diversification Opportunities for ECIT AS and Bouvet

0.26

Correlation Coefficient

ECIT AS  Bouvet

Modest diversification

The 3 months correlation between ECIT and Bouvet is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ECIT AS and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet and ECIT AS 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 ECIT AS are associated (or correlated) with Bouvet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouvet has no effect on the direction of ECIT AS i.e., ECIT AS and Bouvet go up and down completely randomly.

Pair Corralation between ECIT AS and Bouvet

Assuming the 90 days trading horizon ECIT AS is expected to generate 5.36 times less return on investment than Bouvet. But when comparing it to its historical volatility, ECIT AS is 1.51 times less risky than Bouvet. It trades about 0.01 of its potential returns per unit of risk. Bouvet is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,943  in Bouvet on September 5, 2024 and sell it today you would earn a total of  217.00  from holding Bouvet or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.31%
Values	Daily Returns

ECIT AS  vs.  Bouvet

ECIT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECIT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, ECIT AS is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Bouvet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bouvet are ranked lower than 3 (%) 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.

Pair Trading with ECIT AS and Bouvet

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

The idea behind ECIT AS and Bouvet 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.