Correlation Between Itera ASA and Bouvet

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

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

Diversification Opportunities for Itera ASA and Bouvet

0.06

Correlation Coefficient

Itera ASA  Bouvet

Significant diversification

The 3 months correlation between Itera and Bouvet is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Itera ASA and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet and Itera 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 Itera ASA are associated (or correlated) with Bouvet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouvet has no effect on the direction of Itera ASA i.e., Itera ASA and Bouvet go up and down completely randomly.

Pair Corralation between Itera ASA and Bouvet

Assuming the 90 days trading horizon Itera ASA is expected to generate 1.9 times more return on investment than Bouvet. However, Itera ASA is 1.9 times more volatile than Bouvet. It trades about 0.03 of its potential returns per unit of risk. Bouvet is currently generating about -0.04 per unit of risk. If you would invest  894.00  in Itera ASA on December 30, 2024 and sell it today you would earn a total of  30.00  from holding Itera ASA or generate 3.36% return on investment over 90 days.

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

Itera ASA  vs.  Bouvet

Itera ASA

Risk-Adjusted Performance

Weak

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

Bouvet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bouvet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Bouvet is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Itera ASA and Bouvet

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

The idea behind Itera ASA and Bouvet 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.