Correlation Between Atea ASA and Bouvet

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

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

Diversification Opportunities for Atea ASA and Bouvet

0.08

Correlation Coefficient

Atea ASA  Bouvet

Significant diversification

The 3 months correlation between Atea and Bouvet is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Atea ASA and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet and Atea 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 Atea 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 Atea ASA i.e., Atea ASA and Bouvet go up and down completely randomly.

Pair Corralation between Atea ASA and Bouvet

Assuming the 90 days trading horizon Atea ASA is expected to generate 1.29 times less return on investment than Bouvet. In addition to that, Atea ASA is 1.19 times more volatile than Bouvet. It trades about 0.05 of its total potential returns per unit of risk. Bouvet is currently generating about 0.08 per unit of volatility. If you would invest  5,892  in Bouvet on September 14, 2024 and sell it today you would earn a total of  1,608  from holding Bouvet or generate 27.29% return on investment over 90 days.

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

Atea ASA  vs.  Bouvet

Atea ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Atea ASA 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bouvet are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Bouvet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Atea ASA and Bouvet

The main advantage of trading using opposite Atea ASA and Bouvet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atea ASA 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 Atea 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.