Correlation Between Prime Office and Cemat AS

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

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

Diversification Opportunities for Prime Office and Cemat AS

0.37

Correlation Coefficient

Prime Office  Cemat AS

Weak diversification

The 3 months correlation between Prime and Cemat is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prime Office AS and Cemat AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemat AS and Prime Office 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 Prime Office AS are associated (or correlated) with Cemat AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemat AS has no effect on the direction of Prime Office i.e., Prime Office and Cemat AS go up and down completely randomly.

Pair Corralation between Prime Office and Cemat AS

Assuming the 90 days trading horizon Prime Office AS is expected to under-perform the Cemat AS. But the stock apears to be less risky and, when comparing its historical volatility, Prime Office AS is 1.15 times less risky than Cemat AS. The stock trades about -0.01 of its potential returns per unit of risk. The Cemat AS is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Cemat AS on December 22, 2024 and sell it today you would lose (2.00) from holding Cemat AS or give up 1.96% of portfolio value over 90 days.

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

Prime Office AS  vs.  Cemat AS

Prime Office AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prime Office AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Prime Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Cemat AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cemat AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Cemat AS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prime Office and Cemat AS

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

The idea behind Prime Office AS and Cemat AS 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.