Correlation Between Vow ASA and Ultimovacs ASA

Can any of the company-specific risk be diversified away by investing in both Vow ASA and Ultimovacs 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 Ultimovacs 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 Ultimovacs ASA, you can compare the effects of market volatilities on Vow ASA and Ultimovacs 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 Ultimovacs ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vow ASA and Ultimovacs ASA.

Diversification Opportunities for Vow ASA and Ultimovacs ASA

-0.8

Correlation Coefficient

Vow ASA  Ultimovacs ASA

Pay attention - limited upside

The 3 months correlation between Vow and Ultimovacs is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Ultimovacs ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultimovacs 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 Ultimovacs ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultimovacs ASA has no effect on the direction of Vow ASA i.e., Vow ASA and Ultimovacs ASA go up and down completely randomly.

Pair Corralation between Vow ASA and Ultimovacs ASA

Assuming the 90 days trading horizon Vow ASA is expected to under-perform the Ultimovacs ASA. But the stock apears to be less risky and, when comparing its historical volatility, Vow ASA is 1.34 times less risky than Ultimovacs ASA. The stock trades about -0.06 of its potential returns per unit of risk. The Ultimovacs ASA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  10,460  in Ultimovacs ASA on September 26, 2024 and sell it today you would lose (10,216) from holding Ultimovacs ASA or give up 97.67% of portfolio value over 90 days.

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

Vow ASA  vs.  Ultimovacs 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.

Ultimovacs ASA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultimovacs ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Ultimovacs ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vow ASA and Ultimovacs ASA

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

The idea behind Vow ASA and Ultimovacs 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.