Correlation Between Itera ASA and Awilco LNG

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

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

Diversification Opportunities for Itera ASA and Awilco LNG

0.84

Correlation Coefficient

Itera ASA  Awilco LNG

Very poor diversification

The 3 months correlation between Itera and Awilco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Itera ASA and Awilco LNG ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco LNG ASA and Itera 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 Itera ASA are associated (or correlated) with Awilco LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco LNG ASA has no effect on the direction of Itera ASA i.e., Itera ASA and Awilco LNG go up and down completely randomly.

Pair Corralation between Itera ASA and Awilco LNG

Assuming the 90 days trading horizon Itera ASA is expected to generate 0.74 times more return on investment than Awilco LNG. However, Itera ASA is 1.36 times less risky than Awilco LNG. It trades about -0.08 of its potential returns per unit of risk. Awilco LNG ASA is currently generating about -0.16 per unit of risk. If you would invest  1,101  in Itera ASA on September 1, 2024 and sell it today you would lose (203.00) from holding Itera ASA or give up 18.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.48%
Values	Daily Returns

Itera ASA  vs.  Awilco LNG ASA

Itera ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itera 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 December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Awilco LNG ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco LNG 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 essential indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Itera ASA and Awilco LNG

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

The idea behind Itera ASA and Awilco LNG 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.