Correlation Between Aker BP and Storebrand ASA
Can any of the company-specific risk be diversified away by investing in both Aker BP and Storebrand 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 Aker BP and Storebrand ASA 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 Storebrand ASA, you can compare the effects of market volatilities on Aker BP and Storebrand 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 Aker BP with a short position of Storebrand ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Storebrand ASA.
Diversification Opportunities for Aker BP and Storebrand ASA
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aker and Storebrand is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand 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 Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of Aker BP i.e., Aker BP and Storebrand ASA go up and down completely randomly.
Pair Corralation between Aker BP and Storebrand ASA
Assuming the 90 days trading horizon Aker BP ASA is expected to generate 0.95 times more return on investment than Storebrand ASA. However, Aker BP ASA is 1.05 times less risky than Storebrand ASA. It trades about -0.02 of its potential returns per unit of risk. Storebrand ASA is currently generating about -0.09 per unit of risk. If you would invest 22,798 in Aker BP ASA on September 1, 2024 and sell it today you would lose (158.00) from holding Aker BP ASA or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Storebrand ASA
Performance |
| Timeline |
| Aker BP ASA |
| Storebrand ASA |
Aker BP and Storebrand ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Storebrand ASA
The main advantage of trading using opposite Aker BP and Storebrand ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP position performs unexpectedly, Storebrand ASA 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 Storebrand ASA will offset losses from the drop in Storebrand ASA's long position.The idea behind Aker BP ASA and Storebrand 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.| Storebrand ASA vs. DnB ASA | Storebrand ASA vs. Gjensidige Forsikring ASA | Storebrand ASA vs. Orkla ASA | Storebrand ASA vs. Telenor ASA |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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