Correlation Between Entra ASA and Atea ASA

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

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

Diversification Opportunities for Entra ASA and Atea ASA

-0.11

Correlation Coefficient

Entra ASA  Atea ASA

Good diversification

The 3 months correlation between Entra and Atea is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Entra ASA and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA and Entra ASA 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 Entra ASA are associated (or correlated) with Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Entra ASA i.e., Entra ASA and Atea ASA go up and down completely randomly.

Pair Corralation between Entra ASA and Atea ASA

Assuming the 90 days trading horizon Entra ASA is expected to under-perform the Atea ASA. But the stock apears to be less risky and, when comparing its historical volatility, Entra ASA is 1.24 times less risky than Atea ASA. The stock trades about -0.16 of its potential returns per unit of risk. The Atea ASA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14,160  in Atea ASA on September 20, 2024 and sell it today you would lose (480.00) from holding Atea ASA or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Entra ASA  vs.  Atea ASA

Entra ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entra ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Atea ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atea ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Atea ASA 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 Entra ASA and Atea ASA

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

The idea behind Entra ASA and Atea 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.