Correlation Between Techstep ASA and Lea Bank

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

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

Diversification Opportunities for Techstep ASA and Lea Bank

0.35

Correlation Coefficient

Techstep ASA  Lea Bank

Weak diversification

The 3 months correlation between Techstep and Lea is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Techstep ASA and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank ASA and Techstep 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 Techstep ASA are associated (or correlated) with Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Techstep ASA i.e., Techstep ASA and Lea Bank go up and down completely randomly.

Pair Corralation between Techstep ASA and Lea Bank

Assuming the 90 days trading horizon Techstep ASA is expected to generate 0.97 times more return on investment than Lea Bank. However, Techstep ASA is 1.03 times less risky than Lea Bank. It trades about 0.37 of its potential returns per unit of risk. Lea Bank ASA is currently generating about 0.13 per unit of risk. If you would invest  1,200  in Techstep ASA on October 9, 2024 and sell it today you would earn a total of  200.00  from holding Techstep ASA or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Techstep ASA  vs.  Lea Bank ASA

Techstep ASA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Techstep ASA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Techstep ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Lea Bank ASA

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Lea Bank ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite conflicting basic indicators, Lea Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Techstep ASA and Lea Bank

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

The idea behind Techstep ASA and Lea Bank 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.