Correlation Between Mowi ASA and TGS NOPEC

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

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

Diversification Opportunities for Mowi ASA and TGS NOPEC

0.18

Correlation Coefficient

Mowi ASA  TGS NOPEC

Average diversification

The 3 months correlation between Mowi and TGS is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mowi ASA and TGS NOPEC Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGS NOPEC Geophysical and Mowi 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 Mowi ASA are associated (or correlated) with TGS NOPEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGS NOPEC Geophysical has no effect on the direction of Mowi ASA i.e., Mowi ASA and TGS NOPEC go up and down completely randomly.

Pair Corralation between Mowi ASA and TGS NOPEC

Assuming the 90 days trading horizon Mowi ASA is expected to under-perform the TGS NOPEC. But the stock apears to be less risky and, when comparing its historical volatility, Mowi ASA is 1.39 times less risky than TGS NOPEC. The stock trades about -0.2 of its potential returns per unit of risk. The TGS NOPEC Geophysical is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  10,880  in TGS NOPEC Geophysical on December 29, 2024 and sell it today you would lose (830.00) from holding TGS NOPEC Geophysical or give up 7.63% of portfolio value over 90 days.

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

Mowi ASA  vs.  TGS NOPEC Geophysical

Mowi ASA

Risk-Adjusted Performance

Modest

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

TGS NOPEC Geophysical

Risk-Adjusted Performance

Very Weak

Over the last 90 days TGS NOPEC Geophysical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Mowi ASA and TGS NOPEC

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

The idea behind Mowi ASA and TGS NOPEC Geophysical 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.