Correlation Between North Energy and Scatec Solar

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

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

Diversification Opportunities for North Energy and Scatec Solar

0.0

Correlation Coefficient

North Energy  Scatec Solar

Pay attention - limited upside

The 3 months correlation between North and Scatec is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Scatec Solar OL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scatec Solar OL and North Energy 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 North Energy ASA are associated (or correlated) with Scatec Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scatec Solar OL has no effect on the direction of North Energy i.e., North Energy and Scatec Solar go up and down completely randomly.

Pair Corralation between North Energy and Scatec Solar

If you would invest  6,730  in Scatec Solar OL on March 22, 2024 and sell it today you would earn a total of  2,355  from holding Scatec Solar OL or generate 34.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

North Energy ASA  vs.  Scatec Solar OL

North Energy ASA

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days North Energy ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, North Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Scatec Solar OL

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scatec Solar OL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Scatec Solar displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North Energy and Scatec Solar

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

The idea behind North Energy ASA and Scatec Solar OL 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.