Correlation Between Dno ASA and Awilco LNG
Can any of the company-specific risk be diversified away by investing in both Dno ASA and Awilco LNG 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 Dno ASA and Awilco LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dno ASA and Awilco LNG ASA, you can compare the effects of market volatilities on Dno ASA and Awilco LNG 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 Dno ASA with a short position of Awilco LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dno ASA and Awilco LNG.
Diversification Opportunities for Dno ASA and Awilco LNG
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dno and Awilco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dno ASA and Awilco LNG ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco LNG ASA and Dno ASA 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 Dno ASA are associated (or correlated) with Awilco LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco LNG ASA has no effect on the direction of Dno ASA i.e., Dno ASA and Awilco LNG go up and down completely randomly.
Pair Corralation between Dno ASA and Awilco LNG
Assuming the 90 days trading horizon Dno ASA is expected to generate 0.63 times more return on investment than Awilco LNG. However, Dno ASA is 1.58 times less risky than Awilco LNG. It trades about 0.04 of its potential returns per unit of risk. Awilco LNG ASA is currently generating about -0.04 per unit of risk. If you would invest 894.00 in Dno ASA on September 5, 2024 and sell it today you would earn a total of 143.00 from holding Dno ASA or generate 16.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dno ASA vs. Awilco LNG ASA
Performance |
| Timeline |
| Dno ASA |
| Awilco LNG ASA |
Dno ASA and Awilco LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dno ASA and Awilco LNG
The main advantage of trading using opposite Dno ASA and Awilco LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dno ASA position performs unexpectedly, Awilco LNG 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 Awilco LNG will offset losses from the drop in Awilco LNG's long position.The idea behind Dno ASA and Awilco LNG 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.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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