Correlation Between Veidekke ASA and Bonheur

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

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

Diversification Opportunities for Veidekke ASA and Bonheur

-0.32

Correlation Coefficient

Veidekke ASA  Bonheur

Very good diversification

The 3 months correlation between Veidekke and Bonheur is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Veidekke ASA and Bonheur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonheur and Veidekke 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 Veidekke ASA are associated (or correlated) with Bonheur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonheur has no effect on the direction of Veidekke ASA i.e., Veidekke ASA and Bonheur go up and down completely randomly.

Pair Corralation between Veidekke ASA and Bonheur

Assuming the 90 days trading horizon Veidekke ASA is expected to generate 0.74 times more return on investment than Bonheur. However, Veidekke ASA is 1.36 times less risky than Bonheur. It trades about 0.21 of its potential returns per unit of risk. Bonheur is currently generating about 0.04 per unit of risk. If you would invest  12,080  in Veidekke ASA on September 4, 2024 and sell it today you would earn a total of  1,680  from holding Veidekke ASA or generate 13.91% return on investment over 90 days.

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

Veidekke ASA  vs.  Bonheur

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.

Bonheur

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bonheur are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bonheur is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Veidekke ASA and Bonheur

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

The idea behind Veidekke ASA and Bonheur 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.