Correlation Between XXL ASA and Vow ASA
Can any of the company-specific risk be diversified away by investing in both XXL ASA and Vow 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 XXL ASA and Vow ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL ASA and Vow ASA, you can compare the effects of market volatilities on XXL ASA and Vow 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 XXL ASA with a short position of Vow ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL ASA and Vow ASA.
Diversification Opportunities for XXL ASA and Vow ASA
Very good diversification
The 3 months correlation between XXL and Vow is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA and XXL 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 XXL ASA are associated (or correlated) with Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of XXL ASA i.e., XXL ASA and Vow ASA go up and down completely randomly.
Pair Corralation between XXL ASA and Vow ASA
Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Vow ASA. In addition to that, XXL ASA is 1.78 times more volatile than Vow ASA. It trades about -0.15 of its total potential returns per unit of risk. Vow ASA is currently generating about -0.23 per unit of volatility. If you would invest 189.00 in Vow ASA on November 9, 2024 and sell it today you would lose (30.00) from holding Vow ASA or give up 15.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
XXL ASA vs. Vow ASA
Performance |
| Timeline |
| XXL ASA |
| Vow ASA |
XXL ASA and Vow ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XXL ASA and Vow ASA
The main advantage of trading using opposite XXL ASA and Vow ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL ASA position performs unexpectedly, Vow 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 Vow ASA will offset losses from the drop in Vow ASA's long position.The idea behind XXL ASA and Vow 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.| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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