Correlation Between Entra ASA and Pf Bakkafrost

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

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

Diversification Opportunities for Entra ASA and Pf Bakkafrost

-0.58

Correlation Coefficient

Entra ASA  Pf Bakkafrost

Excellent diversification

The 3 months correlation between Entra and BAKKA is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Entra ASA and Pf Bakkafrost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pf Bakkafrost 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 Pf Bakkafrost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pf Bakkafrost has no effect on the direction of Entra ASA i.e., Entra ASA and Pf Bakkafrost go up and down completely randomly.

Pair Corralation between Entra ASA and Pf Bakkafrost

Assuming the 90 days trading horizon Entra ASA is expected to under-perform the Pf Bakkafrost. In addition to that, Entra ASA is 1.02 times more volatile than Pf Bakkafrost. It trades about -0.08 of its total potential returns per unit of risk. Pf Bakkafrost is currently generating about 0.13 per unit of volatility. If you would invest  57,450  in Pf Bakkafrost on August 30, 2024 and sell it today you would earn a total of  8,250  from holding Pf Bakkafrost or generate 14.36% return on investment over 90 days.

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

Entra ASA  vs.  Pf Bakkafrost

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 latest weak 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.

Pf Bakkafrost

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pf Bakkafrost are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Pf Bakkafrost displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entra ASA and Pf Bakkafrost

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

The idea behind Entra ASA and Pf Bakkafrost 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.