Correlation Between Safety Insurance and Atea ASA

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

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

Diversification Opportunities for Safety Insurance and Atea ASA

0.72

Correlation Coefficient

Safety Insurance  Atea ASA

Poor diversification

The 3 months correlation between Safety and Atea is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Safety Insurance i.e., Safety Insurance and Atea ASA go up and down completely randomly.

Pair Corralation between Safety Insurance and Atea ASA

Assuming the 90 days horizon Safety Insurance Group is expected to under-perform the Atea ASA. But the stock apears to be less risky and, when comparing its historical volatility, Safety Insurance Group is 1.09 times less risky than Atea ASA. The stock trades about -0.07 of its potential returns per unit of risk. The Atea ASA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,114  in Atea ASA on September 23, 2024 and sell it today you would earn a total of  30.00  from holding Atea ASA or generate 2.69% return on investment over 90 days.

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

Safety Insurance Group  vs.  Atea ASA

Safety Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Atea ASA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Atea ASA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safety Insurance and Atea ASA

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

The idea behind Safety Insurance Group and Atea 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.