Correlation Between Melhus Sparebank and Hoegh Autoliners

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

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

Diversification Opportunities for Melhus Sparebank and Hoegh Autoliners

-0.13

Correlation Coefficient

Melhus Sparebank  Hoegh Autoliners

Good diversification

The 3 months correlation between Melhus and Hoegh is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Melhus Sparebank and Hoegh Autoliners ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoegh Autoliners ASA and Melhus Sparebank 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 Melhus Sparebank are associated (or correlated) with Hoegh Autoliners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoegh Autoliners ASA has no effect on the direction of Melhus Sparebank i.e., Melhus Sparebank and Hoegh Autoliners go up and down completely randomly.

Pair Corralation between Melhus Sparebank and Hoegh Autoliners

Assuming the 90 days trading horizon Melhus Sparebank is expected to generate 7.42 times less return on investment than Hoegh Autoliners. But when comparing it to its historical volatility, Melhus Sparebank is 2.8 times less risky than Hoegh Autoliners. It trades about 0.03 of its potential returns per unit of risk. Hoegh Autoliners ASA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,682  in Hoegh Autoliners ASA on October 11, 2024 and sell it today you would earn a total of  7,598  from holding Hoegh Autoliners ASA or generate 206.36% return on investment over 90 days.

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

Melhus Sparebank  vs.  Hoegh Autoliners ASA

Melhus Sparebank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melhus Sparebank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Melhus Sparebank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Hoegh Autoliners ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoegh Autoliners ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hoegh Autoliners is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Melhus Sparebank and Hoegh Autoliners

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

The idea behind Melhus Sparebank and Hoegh Autoliners 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.