Correlation Between Aker BP and Yara International
Can any of the company-specific risk be diversified away by investing in both Aker BP and Yara International 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 Yara International 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 Yara International ASA, you can compare the effects of market volatilities on Aker BP and Yara International 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 Yara International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Yara International.
Diversification Opportunities for Aker BP and Yara International
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aker and Yara is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Yara International ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yara International 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 Yara International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yara International ASA has no effect on the direction of Aker BP i.e., Aker BP and Yara International go up and down completely randomly.
Pair Corralation between Aker BP and Yara International
Assuming the 90 days trading horizon Aker BP ASA is expected to generate 1.3 times more return on investment than Yara International. However, Aker BP is 1.3 times more volatile than Yara International ASA. It trades about 0.79 of its potential returns per unit of risk. Yara International ASA is currently generating about 0.57 per unit of risk. If you would invest 21,310 in Aker BP ASA on October 21, 2024 and sell it today you would earn a total of 4,340 from holding Aker BP ASA or generate 20.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Yara International ASA
Performance |
| Timeline |
| Aker BP ASA |
| Yara International ASA |
Aker BP and Yara International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Yara International
The main advantage of trading using opposite Aker BP and Yara International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP position performs unexpectedly, Yara International 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 Yara International will offset losses from the drop in Yara International's long position.The idea behind Aker BP ASA and Yara International 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.| Yara International vs. Telenor ASA | Yara International vs. Orkla ASA | Yara International vs. DnB ASA | Yara International vs. Storebrand 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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