Correlation Between Olav Thon and Byggma

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

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

Diversification Opportunities for Olav Thon and Byggma

0.2

Correlation Coefficient

Olav Thon  Byggma

Modest diversification

The 3 months correlation between Olav and Byggma is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Olav Thon Eien and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma and Olav Thon 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 Olav Thon Eien are associated (or correlated) with Byggma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggma has no effect on the direction of Olav Thon i.e., Olav Thon and Byggma go up and down completely randomly.

Pair Corralation between Olav Thon and Byggma

Assuming the 90 days trading horizon Olav Thon Eien is expected to generate 0.38 times more return on investment than Byggma. However, Olav Thon Eien is 2.6 times less risky than Byggma. It trades about 0.17 of its potential returns per unit of risk. Byggma is currently generating about 0.05 per unit of risk. If you would invest  22,700  in Olav Thon Eien on December 29, 2024 and sell it today you would earn a total of  3,100  from holding Olav Thon Eien or generate 13.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Olav Thon Eien  vs.  Byggma

Olav Thon Eien

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Olav Thon Eien are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Olav Thon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Byggma

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Byggma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Byggma may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Olav Thon and Byggma

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

The idea behind Olav Thon Eien and Byggma 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.