Can any of the company-specific risk be diversified away by investing in both Saga Pure and Magnora 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 Saga Pure and Magnora ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saga Pure ASA and Magnora ASA, you can compare the effects of market volatilities on Saga Pure and Magnora 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 Saga Pure with a short position of Magnora ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saga Pure and Magnora ASA.
Diversification Opportunities for Saga Pure and Magnora ASA
The 3 months correlation between Saga and Magnora is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Saga Pure ASA and Magnora ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnora ASA and Saga Pure 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 Saga Pure ASA are associated (or correlated) with Magnora ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnora ASA has no effect on the direction of Saga Pure i.e., Saga Pure and Magnora ASA go up and down completely randomly.
Pair Corralation between Saga Pure and Magnora ASA
Assuming the 90 days trading horizon Saga Pure is expected to generate 189.54 times less return on investment than Magnora ASA. But when comparing it to its historical volatility, Saga Pure ASA is 1.59 times less risky than Magnora ASA. It trades about 0.0 of its potential returns per unit of risk. Magnora ASA is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 2,965 in Magnora ASA on March 6, 2024 and sell it today you would earn a total of 415.00 from holding Magnora ASA or generate 14.0% return on investment over 90 days.
Over the last 90 days Saga Pure ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Saga Pure is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Magnora ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magnora ASA may actually be approaching a critical reversion point that can send shares even higher in July 2024.