Correlation Between Lea Bank and North Energy
Can any of the company-specific risk be diversified away by investing in both Lea Bank 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 Lea Bank and North Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lea Bank ASA and North Energy ASA, you can compare the effects of market volatilities on Lea Bank 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 Lea Bank with a short position of North Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lea Bank and North Energy.
Diversification Opportunities for Lea Bank and North Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lea and North is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lea Bank ASA 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 Lea Bank 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 Lea Bank ASA 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 Lea Bank i.e., Lea Bank and North Energy go up and down completely randomly.
Pair Corralation between Lea Bank and North Energy
Assuming the 90 days trading horizon Lea Bank ASA is expected to generate 1.1 times more return on investment than North Energy. However, Lea Bank is 1.1 times more volatile than North Energy ASA. It trades about 0.04 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.04 per unit of risk. If you would invest 686.00 in Lea Bank ASA on September 3, 2024 and sell it today you would earn a total of 284.00 from holding Lea Bank ASA or generate 41.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lea Bank ASA vs. North Energy ASA
Performance |
| Timeline |
| Lea Bank ASA |
| North Energy ASA |
Lea Bank and North Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lea Bank and North Energy
The main advantage of trading using opposite Lea Bank and North Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lea Bank 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.| Lea Bank vs. Bien Sparebank ASA | Lea Bank vs. Romerike Sparebank | Lea Bank vs. Elkem ASA | Lea Bank vs. Integrated Wind Solutions |
| North Energy vs. Nidaros Sparebank | North Energy vs. Lea Bank ASA | North Energy vs. Morrow Bank ASA | North Energy vs. Melhus 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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