Correlation Between Zalaris ASA and XXL ASA

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

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

Diversification Opportunities for Zalaris ASA and XXL ASA

0.63

Correlation Coefficient

Zalaris ASA  XXL ASA

Poor diversification

The 3 months correlation between Zalaris and XXL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Zalaris ASA and XXL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL ASA and Zalaris 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 Zalaris ASA are associated (or correlated) with XXL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL ASA has no effect on the direction of Zalaris ASA i.e., Zalaris ASA and XXL ASA go up and down completely randomly.

Pair Corralation between Zalaris ASA and XXL ASA

Assuming the 90 days trading horizon Zalaris ASA is expected to generate 0.18 times more return on investment than XXL ASA. However, Zalaris ASA is 5.56 times less risky than XXL ASA. It trades about -0.02 of its potential returns per unit of risk. XXL ASA is currently generating about -0.25 per unit of risk. If you would invest  7,000  in Zalaris ASA on September 2, 2024 and sell it today you would lose (200.00) from holding Zalaris ASA or give up 2.86% of portfolio value over 90 days.

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

Zalaris ASA  vs.  XXL ASA

Zalaris ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Zalaris ASA and XXL ASA

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

The idea behind Zalaris ASA and XXL 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.