Correlation Between Nel ASA and Everfuel
Can any of the company-specific risk be diversified away by investing in both Nel ASA and Everfuel 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 Nel ASA and Everfuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nel ASA and Everfuel AS, you can compare the effects of market volatilities on Nel ASA and Everfuel 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 Nel ASA with a short position of Everfuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nel ASA and Everfuel.
Diversification Opportunities for Nel ASA and Everfuel
Good diversification
The 3 months correlation between Nel and Everfuel is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nel ASA and Everfuel AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everfuel AS and Nel 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 Nel ASA are associated (or correlated) with Everfuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everfuel AS has no effect on the direction of Nel ASA i.e., Nel ASA and Everfuel go up and down completely randomly.
Pair Corralation between Nel ASA and Everfuel
Assuming the 90 days trading horizon Nel ASA is expected to under-perform the Everfuel. But the stock apears to be less risky and, when comparing its historical volatility, Nel ASA is 1.31 times less risky than Everfuel. The stock trades about -0.06 of its potential returns per unit of risk. The Everfuel AS is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,335 in Everfuel AS on August 30, 2024 and sell it today you would lose (3,041) from holding Everfuel AS or give up 70.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nel ASA vs. Everfuel AS
Performance |
| Timeline |
| Nel ASA |
| Everfuel AS |
Nel ASA and Everfuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nel ASA and Everfuel
The main advantage of trading using opposite Nel ASA and Everfuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nel ASA position performs unexpectedly, Everfuel 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 Everfuel will offset losses from the drop in Everfuel's long position.The idea behind Nel ASA and Everfuel AS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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