Correlation Between Havila Shipping and Arendals Fossekompani

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

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

Diversification Opportunities for Havila Shipping and Arendals Fossekompani

0.77

Correlation Coefficient

Havila Shipping  Arendals Fossekompani

Poor diversification

The 3 months correlation between Havila and Arendals is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Havila Shipping ASA and Arendals Fossekompani ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arendals Fossekompani ASA and Havila Shipping 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 Havila Shipping ASA are associated (or correlated) with Arendals Fossekompani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arendals Fossekompani ASA has no effect on the direction of Havila Shipping i.e., Havila Shipping and Arendals Fossekompani go up and down completely randomly.

Pair Corralation between Havila Shipping and Arendals Fossekompani

Assuming the 90 days trading horizon Havila Shipping ASA is expected to under-perform the Arendals Fossekompani. In addition to that, Havila Shipping is 2.11 times more volatile than Arendals Fossekompani ASA. It trades about -0.08 of its total potential returns per unit of risk. Arendals Fossekompani ASA is currently generating about -0.11 per unit of volatility. If you would invest  16,756  in Arendals Fossekompani ASA on September 2, 2024 and sell it today you would lose (2,536) from holding Arendals Fossekompani ASA or give up 15.13% of portfolio value over 90 days.

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

Havila Shipping ASA  vs.  Arendals Fossekompani ASA

Havila Shipping ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Havila Shipping ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Arendals Fossekompani ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arendals Fossekompani ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Havila Shipping and Arendals Fossekompani

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

The idea behind Havila Shipping ASA and Arendals Fossekompani 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.