Correlation Between Impero AS and Penneo AS

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

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

Diversification Opportunities for Impero AS and Penneo AS

0.2

Correlation Coefficient

Impero AS  Penneo AS

Modest diversification

The 3 months correlation between Impero and Penneo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Impero AS and Penneo AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penneo AS and Impero 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 Impero AS are associated (or correlated) with Penneo AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penneo AS has no effect on the direction of Impero AS i.e., Impero AS and Penneo AS go up and down completely randomly.

Pair Corralation between Impero AS and Penneo AS

Assuming the 90 days trading horizon Impero AS is expected to generate 7.11 times less return on investment than Penneo AS. But when comparing it to its historical volatility, Impero AS is 2.08 times less risky than Penneo AS. It trades about 0.03 of its potential returns per unit of risk. Penneo AS is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  890.00  in Penneo AS on September 3, 2024 and sell it today you would earn a total of  690.00  from holding Penneo AS or generate 77.53% return on investment over 90 days.

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

Impero AS  vs.  Penneo AS

Impero AS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Impero AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Impero AS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Penneo AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penneo AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penneo AS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impero AS and Penneo AS

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

The idea behind Impero AS and Penneo AS 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.