Correlation Between Everfuel and Edda Wind

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

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

Diversification Opportunities for Everfuel and Edda Wind

-0.33

Correlation Coefficient

Everfuel  Edda Wind

Very good diversification

The 3 months correlation between Everfuel and Edda is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Everfuel AS and Edda Wind ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edda Wind ASA and Everfuel 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 Everfuel AS are associated (or correlated) with Edda Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edda Wind ASA has no effect on the direction of Everfuel i.e., Everfuel and Edda Wind go up and down completely randomly.

Pair Corralation between Everfuel and Edda Wind

Assuming the 90 days trading horizon Everfuel AS is expected to generate 0.38 times more return on investment than Edda Wind. However, Everfuel AS is 2.65 times less risky than Edda Wind. It trades about 0.04 of its potential returns per unit of risk. Edda Wind ASA is currently generating about -0.05 per unit of risk. If you would invest  1,270  in Everfuel AS on September 5, 2024 and sell it today you would earn a total of  24.00  from holding Everfuel AS or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Everfuel AS  vs.  Edda Wind ASA

Everfuel AS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Everfuel AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Everfuel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Edda Wind ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edda Wind ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Everfuel and Edda Wind

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

The idea behind Everfuel AS and Edda Wind 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.