Correlation Between North Energy and Bouvet
Can any of the company-specific risk be diversified away by investing in both North Energy and Bouvet 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 North Energy and Bouvet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Energy ASA and Bouvet, you can compare the effects of market volatilities on North Energy and Bouvet 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 North Energy with a short position of Bouvet. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Energy and Bouvet.
Diversification Opportunities for North Energy and Bouvet
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between North and Bouvet is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet and North Energy 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 North Energy ASA are associated (or correlated) with Bouvet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouvet has no effect on the direction of North Energy i.e., North Energy and Bouvet go up and down completely randomly.
Pair Corralation between North Energy and Bouvet
Assuming the 90 days trading horizon North Energy is expected to generate 1.41 times less return on investment than Bouvet. In addition to that, North Energy is 1.18 times more volatile than Bouvet. It trades about 0.11 of its total potential returns per unit of risk. Bouvet is currently generating about 0.18 per unit of volatility. If you would invest 6,746 in Bouvet on August 28, 2024 and sell it today you would earn a total of 384.00 from holding Bouvet or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North Energy ASA vs. Bouvet
Performance |
| Timeline |
| North Energy ASA |
| Bouvet |
North Energy and Bouvet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Energy and Bouvet
The main advantage of trading using opposite North Energy and Bouvet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Energy position performs unexpectedly, Bouvet 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 Bouvet will offset losses from the drop in Bouvet's long position.| North Energy vs. Napatech AS | North Energy vs. Polaris Media | North Energy vs. Goodtech | North Energy vs. Grieg Seafood 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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