Correlation Between Nordic Aqua and Mowi ASA

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

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

Diversification Opportunities for Nordic Aqua and Mowi ASA

-0.09

Correlation Coefficient

Nordic Aqua  Mowi ASA

Good diversification

The 3 months correlation between Nordic and Mowi is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Aqua Partners and Mowi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA and Nordic Aqua 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 Nordic Aqua Partners are associated (or correlated) with Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA has no effect on the direction of Nordic Aqua i.e., Nordic Aqua and Mowi ASA go up and down completely randomly.

Pair Corralation between Nordic Aqua and Mowi ASA

Assuming the 90 days trading horizon Nordic Aqua Partners is expected to generate 1.45 times more return on investment than Mowi ASA. However, Nordic Aqua is 1.45 times more volatile than Mowi ASA. It trades about 0.11 of its potential returns per unit of risk. Mowi ASA is currently generating about 0.01 per unit of risk. If you would invest  7,400  in Nordic Aqua Partners on December 30, 2024 and sell it today you would earn a total of  1,100  from holding Nordic Aqua Partners or generate 14.86% return on investment over 90 days.

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

Nordic Aqua Partners  vs.  Mowi ASA

Nordic Aqua Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Aqua Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Nordic Aqua disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mowi ASA

Risk-Adjusted Performance

Very Weak

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.

Pair Trading with Nordic Aqua and Mowi ASA

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

The idea behind Nordic Aqua Partners and Mowi 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.