Correlation Between EAM Solar and Bien Sparebank

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

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

Diversification Opportunities for EAM Solar and Bien Sparebank

0.54

Correlation Coefficient

EAM Solar  Bien Sparebank

Very weak diversification

The 3 months correlation between EAM and Bien is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EAM Solar ASA and Bien Sparebank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bien Sparebank ASA and EAM Solar 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 EAM Solar ASA are associated (or correlated) with Bien Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bien Sparebank ASA has no effect on the direction of EAM Solar i.e., EAM Solar and Bien Sparebank go up and down completely randomly.

Pair Corralation between EAM Solar and Bien Sparebank

Assuming the 90 days trading horizon EAM Solar ASA is expected to generate 7.67 times more return on investment than Bien Sparebank. However, EAM Solar is 7.67 times more volatile than Bien Sparebank ASA. It trades about 0.17 of its potential returns per unit of risk. Bien Sparebank ASA is currently generating about 0.22 per unit of risk. If you would invest  46.00  in EAM Solar ASA on December 28, 2024 and sell it today you would earn a total of  21.00  from holding EAM Solar ASA or generate 45.65% return on investment over 90 days.

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

EAM Solar ASA  vs.  Bien Sparebank ASA

EAM Solar ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EAM Solar ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, EAM Solar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bien Sparebank ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bien Sparebank ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Bien Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EAM Solar and Bien Sparebank

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

The idea behind EAM Solar ASA and Bien Sparebank 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..