Correlation Between ECIT AS and SmartCraft ASA

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

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

Diversification Opportunities for ECIT AS and SmartCraft ASA

0.01

Correlation Coefficient

ECIT AS  SmartCraft ASA

Significant diversification

The 3 months correlation between ECIT and SmartCraft is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ECIT AS and SmartCraft ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartCraft ASA 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 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 ECIT AS i.e., ECIT AS and SmartCraft ASA go up and down completely randomly.

Pair Corralation between ECIT AS and SmartCraft ASA

Assuming the 90 days trading horizon ECIT AS is expected to generate 0.31 times more return on investment than SmartCraft ASA. However, ECIT AS is 3.18 times less risky than SmartCraft ASA. It trades about 0.01 of its potential returns per unit of risk. SmartCraft ASA is currently generating about -0.04 per unit of risk. If you would invest  984.00  in ECIT AS on September 5, 2024 and sell it today you would earn a total of  4.00  from holding ECIT AS or generate 0.41% return on investment over 90 days.

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

ECIT AS  vs.  SmartCraft ASA

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.

SmartCraft ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartCraft ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ECIT AS and SmartCraft ASA

The main advantage of trading using opposite ECIT AS and SmartCraft ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECIT AS 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 ECIT AS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.