Correlation Between North Energy and Helgeland Sparebank

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

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

Diversification Opportunities for North Energy and Helgeland Sparebank

0.36

Correlation Coefficient

North Energy  Helgeland Sparebank

Weak diversification

The 3 months correlation between North and Helgeland is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Helgeland Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helgeland Sparebank and North Energy 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 North Energy ASA are associated (or correlated) with Helgeland Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helgeland Sparebank has no effect on the direction of North Energy i.e., North Energy and Helgeland Sparebank go up and down completely randomly.

Pair Corralation between North Energy and Helgeland Sparebank

Assuming the 90 days trading horizon North Energy ASA is expected to under-perform the Helgeland Sparebank. In addition to that, North Energy is 1.27 times more volatile than Helgeland Sparebank. It trades about 0.0 of its total potential returns per unit of risk. Helgeland Sparebank is currently generating about 0.1 per unit of volatility. If you would invest  13,502  in Helgeland Sparebank on October 7, 2024 and sell it today you would earn a total of  996.00  from holding Helgeland Sparebank or generate 7.38% return on investment over 90 days.

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

North Energy ASA  vs.  Helgeland Sparebank

North Energy ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Helgeland Sparebank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helgeland Sparebank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Helgeland Sparebank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with North Energy and Helgeland Sparebank

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

The idea behind North Energy ASA and Helgeland Sparebank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.