Correlation Between Hofseth Biocare and Arctic Bioscience

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

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

Diversification Opportunities for Hofseth Biocare and Arctic Bioscience

0.81

Correlation Coefficient

Hofseth Biocare  Arctic Bioscience

Very poor diversification

The 3 months correlation between Hofseth and Arctic is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hofseth Biocare ASA and Arctic Bioscience AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Bioscience and Hofseth Biocare 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 Hofseth Biocare ASA are associated (or correlated) with Arctic Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Bioscience has no effect on the direction of Hofseth Biocare i.e., Hofseth Biocare and Arctic Bioscience go up and down completely randomly.

Pair Corralation between Hofseth Biocare and Arctic Bioscience

Assuming the 90 days trading horizon Hofseth Biocare ASA is expected to generate 0.31 times more return on investment than Arctic Bioscience. However, Hofseth Biocare ASA is 3.28 times less risky than Arctic Bioscience. It trades about -0.15 of its potential returns per unit of risk. Arctic Bioscience AS is currently generating about -0.1 per unit of risk. If you would invest  204.00  in Hofseth Biocare ASA on September 12, 2024 and sell it today you would lose (74.00) from holding Hofseth Biocare ASA or give up 36.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Hofseth Biocare ASA  vs.  Arctic Bioscience AS

Hofseth Biocare ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hofseth Biocare ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Arctic Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Bioscience AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hofseth Biocare and Arctic Bioscience

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

The idea behind Hofseth Biocare ASA and Arctic Bioscience AS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.