Correlation Between Entra ASA and Baltic Sea

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

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

Diversification Opportunities for Entra ASA and Baltic Sea

-0.07

Correlation Coefficient

Entra ASA  Baltic Sea

Good diversification

The 3 months correlation between Entra and Baltic is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Entra ASA and Baltic Sea Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baltic Sea Properties 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 Baltic Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baltic Sea Properties has no effect on the direction of Entra ASA i.e., Entra ASA and Baltic Sea go up and down completely randomly.

Pair Corralation between Entra ASA and Baltic Sea

Assuming the 90 days trading horizon Entra ASA is expected to under-perform the Baltic Sea. But the stock apears to be less risky and, when comparing its historical volatility, Entra ASA is 1.54 times less risky than Baltic Sea. The stock trades about -0.15 of its potential returns per unit of risk. The Baltic Sea Properties is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,900  in Baltic Sea Properties on September 14, 2024 and sell it today you would earn a total of  100.00  from holding Baltic Sea Properties or generate 2.04% return on investment over 90 days.

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

Entra ASA  vs.  Baltic Sea Properties

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.

Baltic Sea Properties

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baltic Sea Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Baltic Sea is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Entra ASA and Baltic Sea

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

The idea behind Entra ASA and Baltic Sea Properties 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.