Correlation Between Fast Ejendom and Prime Office
Can any of the company-specific risk be diversified away by investing in both Fast Ejendom and Prime Office 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 Fast Ejendom and Prime Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Ejendom and Prime Office AS, you can compare the effects of market volatilities on Fast Ejendom and Prime Office 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 Fast Ejendom with a short position of Prime Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Ejendom and Prime Office.
Diversification Opportunities for Fast Ejendom and Prime Office
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fast and Prime is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fast Ejendom and Prime Office AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Office AS and Fast Ejendom 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 Fast Ejendom are associated (or correlated) with Prime Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Office AS has no effect on the direction of Fast Ejendom i.e., Fast Ejendom and Prime Office go up and down completely randomly.
Pair Corralation between Fast Ejendom and Prime Office
Assuming the 90 days trading horizon Fast Ejendom is expected to under-perform the Prime Office. In addition to that, Fast Ejendom is 1.01 times more volatile than Prime Office AS. It trades about -0.05 of its total potential returns per unit of risk. Prime Office AS is currently generating about -0.04 per unit of volatility. If you would invest 18,000 in Prime Office AS on January 26, 2024 and sell it today you would lose (400.00) from holding Prime Office AS or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Ejendom vs. Prime Office AS
Performance |
| Timeline |
| Fast Ejendom |
| Prime Office AS |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fast Ejendom and Prime Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Ejendom and Prime Office
The main advantage of trading using opposite Fast Ejendom and Prime Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Ejendom position performs unexpectedly, Prime Office 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 Prime Office will offset losses from the drop in Prime Office's long position.The idea behind Fast Ejendom and Prime Office AS 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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