Correlation Between XXL ASA and Atlantic Sapphire

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

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

Diversification Opportunities for XXL ASA and Atlantic Sapphire

0.62

Correlation Coefficient

XXL ASA  Atlantic Sapphire

Poor diversification

The 3 months correlation between XXL and Atlantic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Atlantic Sapphire As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Sapphire and XXL 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 XXL ASA are associated (or correlated) with Atlantic Sapphire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Sapphire has no effect on the direction of XXL ASA i.e., XXL ASA and Atlantic Sapphire go up and down completely randomly.

Pair Corralation between XXL ASA and Atlantic Sapphire

Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Atlantic Sapphire. But the stock apears to be less risky and, when comparing its historical volatility, XXL ASA is 1.86 times less risky than Atlantic Sapphire. The stock trades about -0.09 of its potential returns per unit of risk. The Atlantic Sapphire As is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Atlantic Sapphire As on September 17, 2024 and sell it today you would lose (1.48) from holding Atlantic Sapphire As or give up 13.45% of portfolio value over 90 days.

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

XXL ASA  vs.  Atlantic Sapphire As

XXL ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Atlantic Sapphire

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Sapphire As are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Atlantic Sapphire disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XXL ASA and Atlantic Sapphire

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

The idea behind XXL ASA and Atlantic Sapphire As 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.