Correlation Between Cemat AS and Fast Ejendom

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

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

Diversification Opportunities for Cemat AS and Fast Ejendom

-0.2

Correlation Coefficient

Cemat AS  Fast Ejendom

Good diversification

The 3 months correlation between Cemat and Fast is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cemat AS and Fast Ejendom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Ejendom and Cemat AS 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 Cemat AS are associated (or correlated) with Fast Ejendom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Ejendom has no effect on the direction of Cemat AS i.e., Cemat AS and Fast Ejendom go up and down completely randomly.

Pair Corralation between Cemat AS and Fast Ejendom

Assuming the 90 days trading horizon Cemat AS is expected to under-perform the Fast Ejendom. But the stock apears to be less risky and, when comparing its historical volatility, Cemat AS is 1.24 times less risky than Fast Ejendom. The stock trades about -0.08 of its potential returns per unit of risk. The Fast Ejendom is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  11,600  in Fast Ejendom on September 22, 2024 and sell it today you would lose (100.00) from holding Fast Ejendom or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Cemat AS  vs.  Fast Ejendom

Cemat AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemat AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Cemat AS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Fast Ejendom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Ejendom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Fast Ejendom is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cemat AS and Fast Ejendom

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

The idea behind Cemat AS and Fast Ejendom 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.