Correlation Between SmartCraft ASA and Bouvet
Can any of the company-specific risk be diversified away by investing in both SmartCraft ASA 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 SmartCraft ASA and Bouvet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SmartCraft ASA and Bouvet, you can compare the effects of market volatilities on SmartCraft ASA 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 SmartCraft ASA with a short position of Bouvet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartCraft ASA and Bouvet.
Diversification Opportunities for SmartCraft ASA and Bouvet
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between SmartCraft and Bouvet is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SmartCraft ASA and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet and SmartCraft 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 SmartCraft 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 SmartCraft ASA i.e., SmartCraft ASA and Bouvet go up and down completely randomly.
Pair Corralation between SmartCraft ASA and Bouvet
Assuming the 90 days trading horizon SmartCraft ASA is expected to under-perform the Bouvet. In addition to that, SmartCraft ASA is 2.42 times more volatile than Bouvet. It trades about -0.06 of its total potential returns per unit of risk. Bouvet is currently generating about 0.2 per unit of volatility. If you would invest 6,697 in Bouvet on September 1, 2024 and sell it today you would earn a total of 423.00 from holding Bouvet or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SmartCraft ASA vs. Bouvet
Performance |
| Timeline |
| SmartCraft ASA |
| Bouvet |
SmartCraft ASA and Bouvet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SmartCraft ASA and Bouvet
The main advantage of trading using opposite SmartCraft ASA and Bouvet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartCraft ASA 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.The idea behind SmartCraft ASA and Bouvet 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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