Correlation Between Europris ASA and Veidekke ASA

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

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

Diversification Opportunities for Europris ASA and Veidekke ASA

0.45

Correlation Coefficient

Europris ASA  Veidekke ASA

Very weak diversification

The 3 months correlation between Europris and Veidekke is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Europris ASA and Veidekke ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veidekke ASA and Europris 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 Europris ASA are associated (or correlated) with Veidekke ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veidekke ASA has no effect on the direction of Europris ASA i.e., Europris ASA and Veidekke ASA go up and down completely randomly.

Pair Corralation between Europris ASA and Veidekke ASA

Assuming the 90 days trading horizon Europris ASA is expected to generate 1.57 times more return on investment than Veidekke ASA. However, Europris ASA is 1.57 times more volatile than Veidekke ASA. It trades about 0.32 of its potential returns per unit of risk. Veidekke ASA is currently generating about 0.17 per unit of risk. If you would invest  6,505  in Europris ASA on September 25, 2024 and sell it today you would earn a total of  650.00  from holding Europris ASA or generate 9.99% return on investment over 90 days.

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

Europris ASA  vs.  Veidekke ASA

Europris ASA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Europris ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Europris ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Veidekke ASA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veidekke ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Veidekke ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Europris ASA and Veidekke ASA

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

The idea behind Europris ASA and Veidekke 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.