Correlation Between Vow ASA and Energy

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

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

Diversification Opportunities for Vow ASA and Energy

0.25

Correlation Coefficient

Vow ASA  Energy

Modest diversification

The 3 months correlation between Vow and Energy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and Vow ASA 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 Vow ASA are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Vow ASA i.e., Vow ASA and Energy go up and down completely randomly.

Pair Corralation between Vow ASA and Energy

Assuming the 90 days horizon Vow ASA is expected to generate 0.4 times more return on investment than Energy. However, Vow ASA is 2.5 times less risky than Energy. It trades about 0.05 of its potential returns per unit of risk. Energy and Water is currently generating about 0.01 per unit of risk. If you would invest  16.00  in Vow ASA on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Vow ASA or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Vow ASA  vs.  Energy and Water

Vow ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vow ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Vow ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Energy and Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy and Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vow ASA and Energy

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

The idea behind Vow ASA and Energy and Water 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.