Correlation Between Nel ASA and Rosinbomb

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

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

Diversification Opportunities for Nel ASA and Rosinbomb

-0.08

Correlation Coefficient

Nel ASA  Rosinbomb

Good diversification

The 3 months correlation between Nel and Rosinbomb is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nel ASA and Rosinbomb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rosinbomb and Nel 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 Nel ASA are associated (or correlated) with Rosinbomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rosinbomb has no effect on the direction of Nel ASA i.e., Nel ASA and Rosinbomb go up and down completely randomly.

Pair Corralation between Nel ASA and Rosinbomb

Assuming the 90 days horizon Nel ASA is expected to generate 5.56 times less return on investment than Rosinbomb. But when comparing it to its historical volatility, Nel ASA is 1.23 times less risky than Rosinbomb. It trades about 0.05 of its potential returns per unit of risk. Rosinbomb is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Rosinbomb on December 28, 2024 and sell it today you would earn a total of  0.59  from holding Rosinbomb or generate 147.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Nel ASA  vs.  Rosinbomb

Nel ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nel ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nel ASA showed solid returns over the last few months and may actually be approaching a breakup point.

Rosinbomb

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rosinbomb are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Rosinbomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nel ASA and Rosinbomb

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

The idea behind Nel ASA and Rosinbomb 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.