Correlation Between XXL ASA and Europris ASA

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

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

Diversification Opportunities for XXL ASA and Europris ASA

0.2

Correlation Coefficient

XXL ASA  Europris ASA

Modest diversification

The 3 months correlation between XXL and Europris is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and Europris ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europris ASA 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 Europris ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europris ASA has no effect on the direction of XXL ASA i.e., XXL ASA and Europris ASA go up and down completely randomly.

Pair Corralation between XXL ASA and Europris ASA

Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Europris ASA. In addition to that, XXL ASA is 13.25 times more volatile than Europris ASA. It trades about -0.36 of its total potential returns per unit of risk. Europris ASA is currently generating about -0.04 per unit of volatility. If you would invest  6,715  in Europris ASA on September 2, 2024 and sell it today you would lose (90.00) from holding Europris ASA or give up 1.34% of portfolio value over 90 days.

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

XXL ASA  vs.  Europris ASA

XXL ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Europris ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with XXL ASA and Europris ASA

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

The idea behind XXL ASA and Europris ASA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.