Correlation Between Bergenbio ASA and Hofseth Biocare

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

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

Diversification Opportunities for Bergenbio ASA and Hofseth Biocare

-0.64

Correlation Coefficient

Bergenbio ASA  Hofseth Biocare

Excellent diversification

The 3 months correlation between Bergenbio and Hofseth is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bergenbio ASA and Hofseth Biocare ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hofseth Biocare ASA and Bergenbio 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 Bergenbio ASA are associated (or correlated) with Hofseth Biocare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hofseth Biocare ASA has no effect on the direction of Bergenbio ASA i.e., Bergenbio ASA and Hofseth Biocare go up and down completely randomly.

Pair Corralation between Bergenbio ASA and Hofseth Biocare

Assuming the 90 days trading horizon Bergenbio ASA is expected to under-perform the Hofseth Biocare. In addition to that, Bergenbio ASA is 1.57 times more volatile than Hofseth Biocare ASA. It trades about -0.13 of its total potential returns per unit of risk. Hofseth Biocare ASA is currently generating about 0.23 per unit of volatility. If you would invest  130.00  in Hofseth Biocare ASA on November 29, 2024 and sell it today you would earn a total of  174.00  from holding Hofseth Biocare ASA or generate 133.85% return on investment over 90 days.

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

Bergenbio ASA  vs.  Hofseth Biocare ASA

Bergenbio ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bergenbio ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hofseth Biocare ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hofseth Biocare ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Hofseth Biocare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bergenbio ASA and Hofseth Biocare

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

The idea behind Bergenbio ASA and Hofseth Biocare 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.