Correlation Between Euro Tech and Vow ASA

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

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

Diversification Opportunities for Euro Tech and Vow ASA

0.35

Correlation Coefficient

Euro Tech  Vow ASA

Weak diversification

The 3 months correlation between Euro and Vow is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Euro Tech Holdings and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA and Euro Tech 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 Euro Tech Holdings are associated (or correlated) with Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of Euro Tech i.e., Euro Tech and Vow ASA go up and down completely randomly.

Pair Corralation between Euro Tech and Vow ASA

Given the investment horizon of 90 days Euro Tech Holdings is expected to generate 0.56 times more return on investment than Vow ASA. However, Euro Tech Holdings is 1.79 times less risky than Vow ASA. It trades about -0.03 of its potential returns per unit of risk. Vow ASA is currently generating about -0.07 per unit of risk. If you would invest  144.00  in Euro Tech Holdings on December 3, 2024 and sell it today you would lose (9.00) from holding Euro Tech Holdings or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Euro Tech Holdings  vs.  Vow ASA

Euro Tech Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Euro Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Euro Tech is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vow ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vow ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Euro Tech and Vow ASA

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

The idea behind Euro Tech Holdings and Vow 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.