Correlation Between Itera ASA and Northern Ocean
Can any of the company-specific risk be diversified away by investing in both Itera ASA and Northern Ocean 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 Itera ASA and Northern Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itera ASA and Northern Ocean, you can compare the effects of market volatilities on Itera ASA and Northern Ocean 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 Itera ASA with a short position of Northern Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itera ASA and Northern Ocean.
Diversification Opportunities for Itera ASA and Northern Ocean
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Itera and Northern is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Itera ASA and Northern Ocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Ocean and Itera 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 Itera ASA are associated (or correlated) with Northern Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Ocean has no effect on the direction of Itera ASA i.e., Itera ASA and Northern Ocean go up and down completely randomly.
Pair Corralation between Itera ASA and Northern Ocean
Assuming the 90 days trading horizon Itera ASA is expected to under-perform the Northern Ocean. But the stock apears to be less risky and, when comparing its historical volatility, Itera ASA is 1.4 times less risky than Northern Ocean. The stock trades about -0.19 of its potential returns per unit of risk. The Northern Ocean is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 774.00 in Northern Ocean on August 28, 2024 and sell it today you would earn a total of 56.00 from holding Northern Ocean or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itera ASA vs. Northern Ocean
Performance |
| Timeline |
| Itera ASA |
| Northern Ocean |
Itera ASA and Northern Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itera ASA and Northern Ocean
The main advantage of trading using opposite Itera ASA and Northern Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itera ASA position performs unexpectedly, Northern Ocean 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 Northern Ocean will offset losses from the drop in Northern Ocean's long position.| Itera ASA vs. Odfjell Technology | Itera ASA vs. Norwegian Air Shuttle | Itera ASA vs. Sunndal Sparebank | Itera ASA vs. Lea Bank ASA |
| Northern Ocean vs. BW Offshore | Northern Ocean vs. Elkem ASA | Northern Ocean vs. Solstad Offsho | Northern Ocean vs. Arcticzymes Technologies ASA |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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