Correlation Between NEL ASA and Entain Plc

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

By analyzing existing cross correlation between NEL ASA ADR30 and Entain Plc, you can compare the effects of market volatilities on NEL ASA and Entain Plc 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 NEL ASA with a short position of Entain Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEL ASA and Entain Plc.

Diversification Opportunities for NEL ASA and Entain Plc

-0.48

Correlation Coefficient

NEL ASA  Entain Plc

Very good diversification

The 3 months correlation between NEL and Entain is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding NEL ASA ADR30 and Entain Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entain Plc and NEL 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 NEL ASA ADR30 are associated (or correlated) with Entain Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entain Plc has no effect on the direction of NEL ASA i.e., NEL ASA and Entain Plc go up and down completely randomly.

Pair Corralation between NEL ASA and Entain Plc

Assuming the 90 days trading horizon NEL ASA ADR30 is expected to under-perform the Entain Plc. In addition to that, NEL ASA is 1.5 times more volatile than Entain Plc. It trades about -0.07 of its total potential returns per unit of risk. Entain Plc is currently generating about 0.04 per unit of volatility. If you would invest  768.00  in Entain Plc on September 23, 2024 and sell it today you would earn a total of  81.00  from holding Entain Plc or generate 10.55% return on investment over 90 days.

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

NEL ASA ADR30  vs.  Entain Plc

NEL ASA ADR30

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEL ASA ADR30 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 technical and fundamental 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.

Entain Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entain Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Entain Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEL ASA and Entain Plc

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

The idea behind NEL ASA ADR30 and Entain Plc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.