Correlation Between Orsted AS and Power Assets

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

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

Diversification Opportunities for Orsted AS and Power Assets

-0.6

Correlation Coefficient

Orsted AS  Power Assets

Excellent diversification

The 3 months correlation between Orsted and Power is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings and Orsted 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 Orsted AS are associated (or correlated) with Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of Orsted AS i.e., Orsted AS and Power Assets go up and down completely randomly.

Pair Corralation between Orsted AS and Power Assets

Assuming the 90 days horizon Orsted AS is expected to under-perform the Power Assets. In addition to that, Orsted AS is 2.05 times more volatile than Power Assets Holdings. It trades about -0.34 of its total potential returns per unit of risk. Power Assets Holdings is currently generating about 0.21 per unit of volatility. If you would invest  615.00  in Power Assets Holdings on September 22, 2024 and sell it today you would earn a total of  25.00  from holding Power Assets Holdings or generate 4.07% return on investment over 90 days.

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

Orsted AS  vs.  Power Assets Holdings

Orsted AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Power Assets Holdings

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power Assets Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Power Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Orsted AS and Power Assets

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

The idea behind Orsted AS and Power Assets Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.