Correlation Between Carasent ASA and Strongpoint ASA

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

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

Diversification Opportunities for Carasent ASA and Strongpoint ASA

-0.39

Correlation Coefficient

Carasent ASA  Strongpoint ASA

Very good diversification

The 3 months correlation between Carasent and Strongpoint is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Carasent ASA and Strongpoint ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strongpoint ASA and Carasent 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 Carasent ASA are associated (or correlated) with Strongpoint ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strongpoint ASA has no effect on the direction of Carasent ASA i.e., Carasent ASA and Strongpoint ASA go up and down completely randomly.

Pair Corralation between Carasent ASA and Strongpoint ASA

Assuming the 90 days trading horizon Carasent ASA is expected to generate 1.18 times more return on investment than Strongpoint ASA. However, Carasent ASA is 1.18 times more volatile than Strongpoint ASA. It trades about 0.1 of its potential returns per unit of risk. Strongpoint ASA is currently generating about 0.05 per unit of risk. If you would invest  1,760  in Carasent ASA on September 4, 2024 and sell it today you would earn a total of  235.00  from holding Carasent ASA or generate 13.35% return on investment over 90 days.

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

Carasent ASA  vs.  Strongpoint ASA

Carasent ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carasent ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Carasent ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Strongpoint ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Strongpoint ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Strongpoint ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carasent ASA and Strongpoint ASA

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

The idea behind Carasent ASA and Strongpoint 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.