Correlation Between Arctic Bioscience and Hofseth Biocare

Can any of the company-specific risk be diversified away by investing in both Arctic Bioscience and Hofseth Biocare 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 Arctic Bioscience and Hofseth Biocare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arctic Bioscience AS and Hofseth Biocare ASA, you can compare the effects of market volatilities on Arctic Bioscience and Hofseth Biocare 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 Arctic Bioscience with a short position of Hofseth Biocare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arctic Bioscience and Hofseth Biocare.

Diversification Opportunities for Arctic Bioscience and Hofseth Biocare

0.82

Correlation Coefficient

Arctic Bioscience  Hofseth Biocare

Very poor diversification

The 3 months correlation between Arctic and Hofseth is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Bioscience AS and Hofseth Biocare ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hofseth Biocare ASA and Arctic Bioscience 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 Arctic Bioscience AS are associated (or correlated) with Hofseth Biocare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hofseth Biocare ASA has no effect on the direction of Arctic Bioscience i.e., Arctic Bioscience and Hofseth Biocare go up and down completely randomly.

Pair Corralation between Arctic Bioscience and Hofseth Biocare

Assuming the 90 days trading horizon Arctic Bioscience AS is expected to under-perform the Hofseth Biocare. In addition to that, Arctic Bioscience is 3.47 times more volatile than Hofseth Biocare ASA. It trades about -0.11 of its total potential returns per unit of risk. Hofseth Biocare ASA is currently generating about -0.14 per unit of volatility. If you would invest  198.00  in Hofseth Biocare ASA on September 3, 2024 and sell it today you would lose (68.00) from holding Hofseth Biocare ASA or give up 34.34% of portfolio value over 90 days.

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

Arctic Bioscience AS  vs.  Hofseth Biocare ASA

Arctic Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Bioscience AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hofseth Biocare ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hofseth Biocare ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Arctic Bioscience and Hofseth Biocare

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

The idea behind Arctic Bioscience AS and Hofseth Biocare 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.