Correlation Between Bouvet and North Energy
Can any of the company-specific risk be diversified away by investing in both Bouvet and North Energy 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 Bouvet and North Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bouvet and North Energy ASA, you can compare the effects of market volatilities on Bouvet and North Energy 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 Bouvet with a short position of North Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouvet and North Energy.
Diversification Opportunities for Bouvet and North Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bouvet and North is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bouvet and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy ASA and Bouvet 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 Bouvet are associated (or correlated) with North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Bouvet i.e., Bouvet and North Energy go up and down completely randomly.
Pair Corralation between Bouvet and North Energy
Assuming the 90 days trading horizon Bouvet is expected to generate 0.8 times more return on investment than North Energy. However, Bouvet is 1.26 times less risky than North Energy. It trades about 0.2 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.05 per unit of risk. If you would invest 6,697 in Bouvet on September 1, 2024 and sell it today you would earn a total of 423.00 from holding Bouvet or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bouvet vs. North Energy ASA
Performance |
| Timeline |
| Bouvet |
| North Energy ASA |
Bouvet and North Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouvet and North Energy
The main advantage of trading using opposite Bouvet and North Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouvet position performs unexpectedly, North Energy 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 North Energy will offset losses from the drop in North Energy's long position.The idea behind Bouvet and North Energy 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.| North Energy vs. Skue Sparebank | North Energy vs. Aasen Sparebank | North Energy vs. Proximar Seafood AS | North Energy vs. Nidaros Sparebank |
Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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