Correlation Between Aega ASA and Lifecare

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

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

Diversification Opportunities for Aega ASA and Lifecare

0.14

Correlation Coefficient

Aega ASA  Lifecare

Average diversification

The 3 months correlation between Aega and Lifecare is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aega ASA and Lifecare AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifecare AS 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 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 Aega ASA i.e., Aega ASA and Lifecare go up and down completely randomly.

Pair Corralation between Aega ASA and Lifecare

Assuming the 90 days trading horizon Aega ASA is expected to generate 2.62 times more return on investment than Lifecare. However, Aega ASA is 2.62 times more volatile than Lifecare AS. It trades about 0.03 of its potential returns per unit of risk. Lifecare AS is currently generating about -0.01 per unit of risk. If you would invest  35.00  in Aega ASA on December 30, 2024 and sell it today you would lose (9.00) from holding Aega ASA or give up 25.71% of portfolio value over 90 days.

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

Aega ASA  vs.  Lifecare 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 conflicting essential indicators, Aega ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Lifecare AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lifecare AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Lifecare is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aega ASA and Lifecare

The main advantage of trading using opposite Aega ASA and Lifecare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aega 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.

The idea behind Aega ASA and Lifecare 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.