Correlation Between Multiconsult and Veidekke ASA

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

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

Diversification Opportunities for Multiconsult and Veidekke ASA

0.66

Correlation Coefficient

Multiconsult  Veidekke ASA

Poor diversification

The 3 months correlation between Multiconsult and Veidekke is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Multiconsult AS and Veidekke ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veidekke ASA and Multiconsult 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 Multiconsult AS 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 Multiconsult i.e., Multiconsult and Veidekke ASA go up and down completely randomly.

Pair Corralation between Multiconsult and Veidekke ASA

Assuming the 90 days trading horizon Multiconsult is expected to generate 2.42 times less return on investment than Veidekke ASA. But when comparing it to its historical volatility, Multiconsult AS is 1.01 times less risky than Veidekke ASA. It trades about 0.09 of its potential returns per unit of risk. Veidekke ASA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  12,260  in Veidekke ASA on September 21, 2024 and sell it today you would earn a total of  1,840  from holding Veidekke ASA or generate 15.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Multiconsult AS  vs.  Veidekke ASA

Multiconsult AS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multiconsult AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Multiconsult is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Veidekke ASA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veidekke ASA are ranked lower than 16 (%) 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 Multiconsult and Veidekke ASA

The main advantage of trading using opposite Multiconsult and Veidekke ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multiconsult 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 Multiconsult AS 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.