Correlation Between Vow ASA and Nekkar Asa

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

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

Diversification Opportunities for Vow ASA and Nekkar Asa

-0.16

Correlation Coefficient

Vow ASA  Nekkar Asa

Good diversification

The 3 months correlation between Vow and Nekkar is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Nekkar Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nekkar Asa and Vow 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 Vow ASA are associated (or correlated) with Nekkar Asa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nekkar Asa has no effect on the direction of Vow ASA i.e., Vow ASA and Nekkar Asa go up and down completely randomly.

Pair Corralation between Vow ASA and Nekkar Asa

Assuming the 90 days trading horizon Vow ASA is expected to under-perform the Nekkar Asa. In addition to that, Vow ASA is 3.92 times more volatile than Nekkar Asa. It trades about -0.02 of its total potential returns per unit of risk. Nekkar Asa is currently generating about -0.03 per unit of volatility. If you would invest  1,025  in Nekkar Asa on September 11, 2024 and sell it today you would lose (61.00) from holding Nekkar Asa or give up 5.95% of portfolio value over 90 days.

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

Vow ASA  vs.  Nekkar Asa

Vow ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vow ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Nekkar Asa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nekkar Asa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nekkar Asa is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vow ASA and Nekkar Asa

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

The idea behind Vow ASA and Nekkar 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.