Correlation Between Arendals Fossekompani and Yara International

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

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

Diversification Opportunities for Arendals Fossekompani and Yara International

-0.25

Correlation Coefficient

Arendals Fossekompani  Yara International

Very good diversification

The 3 months correlation between Arendals and Yara is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Arendals Fossekompani ASA and Yara International ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yara International ASA and Arendals Fossekompani 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 Arendals Fossekompani ASA are associated (or correlated) with Yara International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yara International ASA has no effect on the direction of Arendals Fossekompani i.e., Arendals Fossekompani and Yara International go up and down completely randomly.

Pair Corralation between Arendals Fossekompani and Yara International

Assuming the 90 days trading horizon Arendals Fossekompani ASA is expected to generate 1.11 times more return on investment than Yara International. However, Arendals Fossekompani is 1.11 times more volatile than Yara International ASA. It trades about 0.25 of its potential returns per unit of risk. Yara International ASA is currently generating about -0.05 per unit of risk. If you would invest  14,760  in Arendals Fossekompani ASA on January 29, 2024 and sell it today you would earn a total of  3,020  from holding Arendals Fossekompani ASA or generate 20.46% return on investment over 90 days.

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

Arendals Fossekompani ASA  vs.  Yara International ASA

Arendals Fossekompani ASA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arendals Fossekompani ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Arendals Fossekompani may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Arendals Fossekompani and Yara International

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

The idea behind Arendals Fossekompani ASA and Yara International 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.

Check out your portfolio center.

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.