Correlation Between Aega ASA and EAM Solar

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Can any of the company-specific risk be diversified away by investing in both Aega ASA and EAM Solar 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 Aega ASA and EAM Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aega ASA and EAM Solar ASA, you can compare the effects of market volatilities on Aega ASA and EAM Solar 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 Aega ASA with a short position of EAM Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aega ASA and EAM Solar.

Diversification Opportunities for Aega ASA and EAM Solar

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Aega and EAM is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aega ASA and EAM Solar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAM Solar ASA and Aega 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 Aega ASA are associated (or correlated) with EAM Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAM Solar ASA has no effect on the direction of Aega ASA i.e., Aega ASA and EAM Solar go up and down completely randomly.

Pair Corralation between Aega ASA and EAM Solar

Assuming the 90 days trading horizon Aega ASA is expected to under-perform the EAM Solar. But the stock apears to be less risky and, when comparing its historical volatility, Aega ASA is 1.33 times less risky than EAM Solar. The stock trades about 0.0 of its potential returns per unit of risk. The EAM Solar ASA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,385  in EAM Solar ASA on January 31, 2024 and sell it today you would earn a total of  165.00  from holding EAM Solar ASA or generate 11.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Aega ASA  vs.  EAM Solar ASA

 Performance 
       Timeline  
Aega ASA 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Aega 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 basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
EAM Solar ASA 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in EAM Solar ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, EAM Solar may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Aega ASA and EAM Solar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aega ASA and EAM Solar

The main advantage of trading using opposite Aega ASA and EAM Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aega ASA position performs unexpectedly, EAM Solar 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 EAM Solar will offset losses from the drop in EAM Solar's long position.
The idea behind Aega ASA and EAM Solar 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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