Correlation Between Vow ASA and Lifecare
Can any of the company-specific risk be diversified away by investing in both Vow ASA and Lifecare 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 Vow ASA and Lifecare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vow ASA and Lifecare AS, you can compare the effects of market volatilities on Vow ASA and Lifecare 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 Vow ASA with a short position of Lifecare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vow ASA and Lifecare.
Diversification Opportunities for Vow ASA and Lifecare
Poor diversification
The 3 months correlation between Vow and Lifecare is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Lifecare AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifecare AS and Vow 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 Vow ASA are associated (or correlated) with Lifecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifecare AS has no effect on the direction of Vow ASA i.e., Vow ASA and Lifecare go up and down completely randomly.
Pair Corralation between Vow ASA and Lifecare
Assuming the 90 days trading horizon Vow ASA is expected to under-perform the Lifecare. In addition to that, Vow ASA is 1.46 times more volatile than Lifecare AS. It trades about -0.1 of its total potential returns per unit of risk. Lifecare AS is currently generating about -0.08 per unit of volatility. If you would invest 2,395 in Lifecare AS on January 14, 2025 and sell it today you would lose (1,431) from holding Lifecare AS or give up 59.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vow ASA vs. Lifecare AS
Performance |
| Timeline |
| Vow ASA |
| Lifecare AS |
Vow ASA and Lifecare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vow ASA and Lifecare
The main advantage of trading using opposite Vow ASA and Lifecare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vow ASA position performs unexpectedly, Lifecare 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 Lifecare will offset losses from the drop in Lifecare's long position.| Vow ASA vs. Hexagon Composites ASA | Vow ASA vs. Vow Green Metals | Vow ASA vs. REC Silicon ASA | Vow ASA vs. Aker Carbon Capture |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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