Correlation Between Lifecare and Eqva ASA
Can any of the company-specific risk be diversified away by investing in both Lifecare and Eqva ASA 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 Lifecare and Eqva ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifecare AS and Eqva ASA, you can compare the effects of market volatilities on Lifecare and Eqva ASA 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 Lifecare with a short position of Eqva ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifecare and Eqva ASA.
Diversification Opportunities for Lifecare and Eqva ASA
Poor diversification
The 3 months correlation between Lifecare and Eqva is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lifecare AS and Eqva ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eqva ASA and Lifecare 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 Lifecare AS are associated (or correlated) with Eqva ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eqva ASA has no effect on the direction of Lifecare i.e., Lifecare and Eqva ASA go up and down completely randomly.
Pair Corralation between Lifecare and Eqva ASA
Assuming the 90 days trading horizon Lifecare is expected to generate 3.38 times less return on investment than Eqva ASA. In addition to that, Lifecare is 1.49 times more volatile than Eqva ASA. It trades about 0.01 of its total potential returns per unit of risk. Eqva ASA is currently generating about 0.05 per unit of volatility. If you would invest 290.00 in Eqva ASA on August 25, 2024 and sell it today you would earn a total of 198.00 from holding Eqva ASA or generate 68.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifecare AS vs. Eqva ASA
Performance |
| Timeline |
| Lifecare AS |
| Eqva ASA |
Lifecare and Eqva ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifecare and Eqva ASA
The main advantage of trading using opposite Lifecare and Eqva ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifecare position performs unexpectedly, Eqva ASA 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 Eqva ASA will offset losses from the drop in Eqva ASA's long position.The idea behind Lifecare AS and Eqva 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.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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