Correlation Between XXL ASA and Bonheur

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

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

Diversification Opportunities for XXL ASA and Bonheur

0.05

Correlation Coefficient

XXL ASA  Bonheur

Significant diversification

The 3 months correlation between XXL and Bonheur is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Bonheur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonheur and XXL 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 XXL ASA are associated (or correlated) with Bonheur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonheur has no effect on the direction of XXL ASA i.e., XXL ASA and Bonheur go up and down completely randomly.

Pair Corralation between XXL ASA and Bonheur

Assuming the 90 days trading horizon XXL ASA is expected to generate 4.94 times more return on investment than Bonheur. However, XXL ASA is 4.94 times more volatile than Bonheur. It trades about 0.11 of its potential returns per unit of risk. Bonheur is currently generating about -0.11 per unit of risk. If you would invest  816.00  in XXL ASA on December 29, 2024 and sell it today you would earn a total of  394.00  from holding XXL ASA or generate 48.28% return on investment over 90 days.

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

XXL ASA  vs.  Bonheur

XXL ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XXL ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, XXL ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bonheur

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bonheur has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with XXL ASA and Bonheur

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

The idea behind XXL ASA and Bonheur 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.