Correlation Between Var Energi and Napatech

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

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

Diversification Opportunities for Var Energi and Napatech

0.7

Correlation Coefficient

Var Energi  Napatech

Poor diversification

The 3 months correlation between Var and Napatech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Var Energi ASA and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS and Var Energi 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 Var Energi ASA are associated (or correlated) with Napatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Napatech AS has no effect on the direction of Var Energi i.e., Var Energi and Napatech go up and down completely randomly.

Pair Corralation between Var Energi and Napatech

Assuming the 90 days trading horizon Var Energi ASA is expected to generate 0.49 times more return on investment than Napatech. However, Var Energi ASA is 2.06 times less risky than Napatech. It trades about 0.0 of its potential returns per unit of risk. Napatech AS is currently generating about -0.03 per unit of risk. If you would invest  3,380  in Var Energi ASA on December 27, 2024 and sell it today you would lose (35.00) from holding Var Energi ASA or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Var Energi ASA  vs.  Napatech AS

Var Energi ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Var Energi ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Var Energi is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Napatech AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Var Energi and Napatech

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

The idea behind Var Energi ASA and Napatech 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.