Correlation Between Entra ASA and Pexip Holding

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

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

Diversification Opportunities for Entra ASA and Pexip Holding

-0.74

Correlation Coefficient

Entra ASA  Pexip Holding

Pay attention - limited upside

The 3 months correlation between Entra and Pexip is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Entra ASA and Pexip Holding ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pexip Holding 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 Pexip Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pexip Holding ASA has no effect on the direction of Entra ASA i.e., Entra ASA and Pexip Holding go up and down completely randomly.

Pair Corralation between Entra ASA and Pexip Holding

Assuming the 90 days trading horizon Entra ASA is expected to under-perform the Pexip Holding. But the stock apears to be less risky and, when comparing its historical volatility, Entra ASA is 1.05 times less risky than Pexip Holding. The stock trades about -0.14 of its potential returns per unit of risk. The Pexip Holding ASA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,670  in Pexip Holding ASA on September 17, 2024 and sell it today you would earn a total of  930.00  from holding Pexip Holding ASA or generate 25.34% return on investment over 90 days.

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

Entra ASA  vs.  Pexip Holding 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.

Pexip Holding ASA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pexip Holding ASA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pexip Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entra ASA and Pexip Holding

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

The idea behind Entra ASA and Pexip Holding 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.