Correlation Between Tile Shop and Austevoll Seafood

Can any of the company-specific risk be diversified away by investing in both Tile Shop and Austevoll Seafood 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 Tile Shop and Austevoll Seafood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tile Shop Holdings and Austevoll Seafood ASA, you can compare the effects of market volatilities on Tile Shop and Austevoll Seafood 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 Tile Shop with a short position of Austevoll Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Austevoll Seafood.

Diversification Opportunities for Tile Shop and Austevoll Seafood

0.68

Correlation Coefficient

Tile Shop  Austevoll Seafood

Poor diversification

The 3 months correlation between Tile and Austevoll is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Austevoll Seafood ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austevoll Seafood ASA and Tile Shop 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 Tile Shop Holdings are associated (or correlated) with Austevoll Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austevoll Seafood ASA has no effect on the direction of Tile Shop i.e., Tile Shop and Austevoll Seafood go up and down completely randomly.

Pair Corralation between Tile Shop and Austevoll Seafood

Assuming the 90 days horizon Tile Shop Holdings is expected to generate 0.9 times more return on investment than Austevoll Seafood. However, Tile Shop Holdings is 1.11 times less risky than Austevoll Seafood. It trades about 0.14 of its potential returns per unit of risk. Austevoll Seafood ASA is currently generating about 0.06 per unit of risk. If you would invest  610.00  in Tile Shop Holdings on December 2, 2024 and sell it today you would earn a total of  105.00  from holding Tile Shop Holdings or generate 17.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tile Shop Holdings  vs.  Austevoll Seafood ASA

Tile Shop Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tile Shop Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tile Shop reported solid returns over the last few months and may actually be approaching a breakup point.

Austevoll Seafood ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Austevoll Seafood ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Austevoll Seafood may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tile Shop and Austevoll Seafood

The main advantage of trading using opposite Tile Shop and Austevoll Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop position performs unexpectedly, Austevoll Seafood 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 Austevoll Seafood will offset losses from the drop in Austevoll Seafood's long position.

The idea behind Tile Shop Holdings and Austevoll Seafood 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.