Correlation Between Afarak Group and Dovre Group

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

By analyzing existing cross correlation between Afarak Group Oyj and Dovre Group Plc, you can compare the effects of market volatilities on Afarak Group and Dovre Group 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 Afarak Group with a short position of Dovre Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afarak Group and Dovre Group.

Diversification Opportunities for Afarak Group and Dovre Group

0.05

Correlation Coefficient

Afarak Group  Dovre Group

Significant diversification

The 3 months correlation between Afarak and Dovre is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Afarak Group Oyj and Dovre Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dovre Group Plc and Afarak Group 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 Afarak Group Oyj are associated (or correlated) with Dovre Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dovre Group Plc has no effect on the direction of Afarak Group i.e., Afarak Group and Dovre Group go up and down completely randomly.

Pair Corralation between Afarak Group and Dovre Group

Assuming the 90 days trading horizon Afarak Group is expected to generate 1.08 times less return on investment than Dovre Group. But when comparing it to its historical volatility, Afarak Group Oyj is 1.88 times less risky than Dovre Group. It trades about 0.05 of its potential returns per unit of risk. Dovre Group Plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Dovre Group Plc on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Dovre Group Plc or generate 0.0% return on investment over 90 days.

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

Afarak Group Oyj  vs.  Dovre Group Plc

Afarak Group Oyj

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Afarak Group Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Afarak Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dovre Group Plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dovre Group Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Dovre Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Afarak Group and Dovre Group

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

The idea behind Afarak Group Oyj and Dovre Group Plc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.