Correlation Between Aker BP and Hermana Holding
Can any of the company-specific risk be diversified away by investing in both Aker BP and Hermana Holding 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 Aker BP and Hermana Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker BP ASA and Hermana Holding ASA, you can compare the effects of market volatilities on Aker BP and Hermana Holding 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 Aker BP with a short position of Hermana Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Hermana Holding.
Diversification Opportunities for Aker BP and Hermana Holding
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aker and Hermana is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Hermana Holding ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermana Holding ASA and Aker BP 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 Aker BP ASA are associated (or correlated) with Hermana Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hermana Holding ASA has no effect on the direction of Aker BP i.e., Aker BP and Hermana Holding go up and down completely randomly.
Pair Corralation between Aker BP and Hermana Holding
Assuming the 90 days trading horizon Aker BP ASA is expected to under-perform the Hermana Holding. But the stock apears to be less risky and, when comparing its historical volatility, Aker BP ASA is 1.71 times less risky than Hermana Holding. The stock trades about -0.12 of its potential returns per unit of risk. The Hermana Holding ASA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,190 in Hermana Holding ASA on December 5, 2024 and sell it today you would lose (68.00) from holding Hermana Holding ASA or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Hermana Holding ASA
Performance |
| Timeline |
| Aker BP ASA |
| Hermana Holding ASA |
Aker BP and Hermana Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Hermana Holding
The main advantage of trading using opposite Aker BP and Hermana Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP position performs unexpectedly, Hermana Holding 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 Hermana Holding will offset losses from the drop in Hermana Holding's long position.The idea behind Aker BP ASA and Hermana Holding 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.| Hermana Holding vs. Sea1 Offshore | Hermana Holding vs. Techstep ASA | Hermana Holding vs. Aasen Sparebank | Hermana Holding vs. Grong Sparebank |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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