Correlation Between Veidekke ASA and Olav Thon

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

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

Diversification Opportunities for Veidekke ASA and Olav Thon

0.62

Correlation Coefficient

Veidekke ASA  Olav Thon

Poor diversification

The 3 months correlation between Veidekke and Olav is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Veidekke ASA and Olav Thon Eien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olav Thon Eien and Veidekke 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 Veidekke ASA are associated (or correlated) with Olav Thon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olav Thon Eien has no effect on the direction of Veidekke ASA i.e., Veidekke ASA and Olav Thon go up and down completely randomly.

Pair Corralation between Veidekke ASA and Olav Thon

Assuming the 90 days trading horizon Veidekke ASA is expected to generate 3.97 times less return on investment than Olav Thon. But when comparing it to its historical volatility, Veidekke ASA is 1.25 times less risky than Olav Thon. It trades about 0.05 of its potential returns per unit of risk. Olav Thon Eien is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  22,700  in Olav Thon Eien on December 30, 2024 and sell it today you would earn a total of  3,100  from holding Olav Thon Eien or generate 13.66% return on investment over 90 days.

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

Veidekke ASA  vs.  Olav Thon Eien

Veidekke ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Veidekke ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Veidekke ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Olav Thon Eien

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Olav Thon Eien are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Olav Thon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veidekke ASA and Olav Thon

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

The idea behind Veidekke ASA and Olav Thon Eien 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.