Correlation Between Aega ASA and Arctic Bioscience

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

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

Diversification Opportunities for Aega ASA and Arctic Bioscience

-0.29

Correlation Coefficient

Aega ASA  Arctic Bioscience

Very good diversification

The 3 months correlation between Aega and Arctic is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aega ASA and Arctic Bioscience AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Bioscience and Aega 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 Aega ASA are associated (or correlated) with Arctic Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Bioscience has no effect on the direction of Aega ASA i.e., Aega ASA and Arctic Bioscience go up and down completely randomly.

Pair Corralation between Aega ASA and Arctic Bioscience

Assuming the 90 days trading horizon Aega ASA is expected to generate 5.67 times less return on investment than Arctic Bioscience. In addition to that, Aega ASA is 1.64 times more volatile than Arctic Bioscience AS. It trades about 0.03 of its total potential returns per unit of risk. Arctic Bioscience AS is currently generating about 0.25 per unit of volatility. If you would invest  183.00  in Arctic Bioscience AS on December 29, 2024 and sell it today you would earn a total of  412.00  from holding Arctic Bioscience AS or generate 225.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Aega ASA  vs.  Arctic Bioscience AS

Aega ASA

Risk-Adjusted Performance

Weak

Over the last 90 days Aega ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating essential indicators, Aega ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Arctic Bioscience

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Bioscience AS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Arctic Bioscience disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aega ASA and Arctic Bioscience

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

The idea behind Aega ASA and Arctic Bioscience AS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.