Correlation Between Vow ASA and Cadeler As

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

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

Diversification Opportunities for Vow ASA and Cadeler As

0.8

Correlation Coefficient

Vow ASA  Cadeler As

Very poor diversification

The 3 months correlation between Vow and Cadeler is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Cadeler As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadeler As 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 Cadeler As. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadeler As has no effect on the direction of Vow ASA i.e., Vow ASA and Cadeler As go up and down completely randomly.

Pair Corralation between Vow ASA and Cadeler As

Assuming the 90 days trading horizon Vow ASA is expected to generate 6.25 times more return on investment than Cadeler As. However, Vow ASA is 6.25 times more volatile than Cadeler As. It trades about -0.01 of its potential returns per unit of risk. Cadeler As is currently generating about -0.06 per unit of risk. If you would invest  250.00  in Vow ASA on September 16, 2024 and sell it today you would lose (65.00) from holding Vow ASA or give up 26.0% of portfolio value over 90 days.

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

Vow ASA  vs.  Cadeler As

Vow ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cadeler As

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadeler As has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cadeler As is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vow ASA and Cadeler As

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

The idea behind Vow ASA and Cadeler 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.