Correlation Between Magnora ASA and Scatec Solar

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

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

Diversification Opportunities for Magnora ASA and Scatec Solar

-0.15

Correlation Coefficient

Magnora ASA  Scatec Solar

Good diversification

The 3 months correlation between Magnora and Scatec is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Magnora ASA and Scatec Solar OL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scatec Solar OL and Magnora 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 Magnora ASA are associated (or correlated) with Scatec Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scatec Solar OL has no effect on the direction of Magnora ASA i.e., Magnora ASA and Scatec Solar go up and down completely randomly.

Pair Corralation between Magnora ASA and Scatec Solar

Assuming the 90 days trading horizon Magnora ASA is expected to generate 1.06 times more return on investment than Scatec Solar. However, Magnora ASA is 1.06 times more volatile than Scatec Solar OL. It trades about 0.08 of its potential returns per unit of risk. Scatec Solar OL is currently generating about 0.03 per unit of risk. If you would invest  2,207  in Magnora ASA on September 4, 2024 and sell it today you would earn a total of  223.00  from holding Magnora ASA or generate 10.1% return on investment over 90 days.

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

Magnora ASA  vs.  Scatec Solar OL

Magnora ASA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magnora ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magnora ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Scatec Solar OL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scatec Solar OL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Scatec Solar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magnora ASA and Scatec Solar

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

The idea behind Magnora ASA and Scatec Solar OL 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.