Correlation Between AF Gruppen and Bouvet

Can any of the company-specific risk be diversified away by investing in both AF Gruppen and Bouvet 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 Bouvet 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 Bouvet, you can compare the effects of market volatilities on AF Gruppen and Bouvet 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 Bouvet. Check out your portfolio center. Please also check ongoing floating volatility patterns of AF Gruppen and Bouvet.

Diversification Opportunities for AF Gruppen and Bouvet

0.44

Correlation Coefficient

AF Gruppen  Bouvet

Very weak diversification

The 3 months correlation between AFG and Bouvet is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet 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 Bouvet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouvet has no effect on the direction of AF Gruppen i.e., AF Gruppen and Bouvet go up and down completely randomly.

Pair Corralation between AF Gruppen and Bouvet

Assuming the 90 days trading horizon AF Gruppen ASA is expected to under-perform the Bouvet. In addition to that, AF Gruppen is 1.08 times more volatile than Bouvet. It trades about -0.02 of its total potential returns per unit of risk. Bouvet is currently generating about 0.01 per unit of volatility. If you would invest  7,350  in Bouvet on December 23, 2024 and sell it today you would earn a total of  30.00  from holding Bouvet or generate 0.41% return on investment over 90 days.

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

AF Gruppen ASA  vs.  Bouvet

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.

Bouvet

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AF Gruppen and Bouvet

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

The idea behind AF Gruppen ASA and Bouvet 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.