Correlation Between Aker BP and Morrow Bank
Can any of the company-specific risk be diversified away by investing in both Aker BP and Morrow Bank 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 Morrow Bank 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 Morrow Bank ASA, you can compare the effects of market volatilities on Aker BP and Morrow Bank 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 Morrow Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Morrow Bank.
Diversification Opportunities for Aker BP and Morrow Bank
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aker and Morrow is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Morrow Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morrow Bank 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 Morrow Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morrow Bank ASA has no effect on the direction of Aker BP i.e., Aker BP and Morrow Bank go up and down completely randomly.
Pair Corralation between Aker BP and Morrow Bank
Assuming the 90 days trading horizon Aker BP is expected to generate 8.9 times less return on investment than Morrow Bank. But when comparing it to its historical volatility, Aker BP ASA is 1.46 times less risky than Morrow Bank. It trades about 0.1 of its potential returns per unit of risk. Morrow Bank ASA is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest 638.00 in Morrow Bank ASA on August 29, 2024 and sell it today you would earn a total of 222.00 from holding Morrow Bank ASA or generate 34.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Morrow Bank ASA
Performance |
| Timeline |
| Aker BP ASA |
| Morrow Bank ASA |
Aker BP and Morrow Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Morrow Bank
The main advantage of trading using opposite Aker BP and Morrow Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP position performs unexpectedly, Morrow Bank 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 Morrow Bank will offset losses from the drop in Morrow Bank's long position.The idea behind Aker BP ASA and Morrow Bank 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.| Morrow Bank vs. Grong Sparebank | Morrow Bank vs. Proximar Seafood AS | Morrow Bank vs. Nordic Mining ASA | Morrow Bank vs. Odfjell Technology |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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