Correlation Between Clean Seas and EAM Solar
Can any of the company-specific risk be diversified away by investing in both Clean Seas and EAM Solar 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 Clean Seas and EAM Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Seas Seafood and EAM Solar ASA, you can compare the effects of market volatilities on Clean Seas and EAM Solar 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 Clean Seas with a short position of EAM Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Seas and EAM Solar.
Diversification Opportunities for Clean Seas and EAM Solar
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Clean and EAM is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Clean Seas Seafood and EAM Solar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAM Solar ASA and Clean Seas 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 Clean Seas Seafood are associated (or correlated) with EAM Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAM Solar ASA has no effect on the direction of Clean Seas i.e., Clean Seas and EAM Solar go up and down completely randomly.
Pair Corralation between Clean Seas and EAM Solar
Assuming the 90 days trading horizon Clean Seas Seafood is expected to generate 0.1 times more return on investment than EAM Solar. However, Clean Seas Seafood is 10.42 times less risky than EAM Solar. It trades about -0.22 of its potential returns per unit of risk. EAM Solar ASA is currently generating about -0.11 per unit of risk. If you would invest 85.00 in Clean Seas Seafood on November 4, 2024 and sell it today you would lose (5.00) from holding Clean Seas Seafood or give up 5.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Clean Seas Seafood vs. EAM Solar ASA
Performance |
| Timeline |
| Clean Seas Seafood |
| EAM Solar ASA |
Clean Seas and EAM Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Seas and EAM Solar
The main advantage of trading using opposite Clean Seas and EAM Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Seas position performs unexpectedly, EAM Solar 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 EAM Solar will offset losses from the drop in EAM Solar's long position.The idea behind Clean Seas Seafood and EAM Solar 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.| EAM Solar vs. Odfjell Technology | EAM Solar vs. Morrow Bank ASA | EAM Solar vs. Eidesvik Offshore ASA | EAM Solar vs. Sogn 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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