Correlation Between AF Gruppen and Arendals Fossekompani

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

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

Diversification Opportunities for AF Gruppen and Arendals Fossekompani

0.23

Correlation Coefficient

AF Gruppen  Arendals Fossekompani

Modest diversification

The 3 months correlation between AFG and Arendals is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and Arendals Fossekompani ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arendals Fossekompani ASA and AF Gruppen 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 AF Gruppen ASA are associated (or correlated) with Arendals Fossekompani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arendals Fossekompani ASA has no effect on the direction of AF Gruppen i.e., AF Gruppen and Arendals Fossekompani go up and down completely randomly.

Pair Corralation between AF Gruppen and Arendals Fossekompani

Assuming the 90 days trading horizon AF Gruppen ASA is expected to generate 0.93 times more return on investment than Arendals Fossekompani. However, AF Gruppen ASA is 1.07 times less risky than Arendals Fossekompani. It trades about -0.04 of its potential returns per unit of risk. Arendals Fossekompani ASA is currently generating about -0.07 per unit of risk. If you would invest  14,840  in AF Gruppen ASA on December 30, 2024 and sell it today you would lose (780.00) from holding AF Gruppen ASA or give up 5.26% of portfolio value over 90 days.

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

AF Gruppen ASA  vs.  Arendals Fossekompani ASA

AF Gruppen ASA

Risk-Adjusted Performance

Very Weak

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

Arendals Fossekompani ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arendals Fossekompani ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with AF Gruppen and Arendals Fossekompani

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

The idea behind AF Gruppen ASA and Arendals Fossekompani 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.