Correlation Between Var Energi and Standard Supply

Can any of the company-specific risk be diversified away by investing in both Var Energi and Standard Supply 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 Standard Supply 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 Standard Supply AS, you can compare the effects of market volatilities on Var Energi and Standard Supply 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 Standard Supply. Check out your portfolio center. Please also check ongoing floating volatility patterns of Var Energi and Standard Supply.

Diversification Opportunities for Var Energi and Standard Supply

0.29

Correlation Coefficient

Var Energi  Standard Supply

Modest diversification

The 3 months correlation between Var and Standard is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Var Energi ASA and Standard Supply AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Supply 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 Standard Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Supply AS has no effect on the direction of Var Energi i.e., Var Energi and Standard Supply go up and down completely randomly.

Pair Corralation between Var Energi and Standard Supply

Assuming the 90 days trading horizon Var Energi ASA is expected to under-perform the Standard Supply. But the stock apears to be less risky and, when comparing its historical volatility, Var Energi ASA is 1.77 times less risky than Standard Supply. The stock trades about -0.22 of its potential returns per unit of risk. The Standard Supply AS is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,300  in Standard Supply AS on December 5, 2024 and sell it today you would lose (200.00) from holding Standard Supply AS or give up 8.7% of portfolio value over 90 days.

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

Var Energi ASA  vs.  Standard Supply 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 unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Standard Supply AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Supply AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Standard Supply may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Var Energi and Standard Supply

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

The idea behind Var Energi ASA and Standard Supply 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.