Correlation Between Hafnia and Aker BP
Can any of the company-specific risk be diversified away by investing in both Hafnia and Aker BP 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 Hafnia and Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hafnia and Aker BP ASA, you can compare the effects of market volatilities on Hafnia and Aker BP 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 Hafnia with a short position of Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hafnia and Aker BP.
Diversification Opportunities for Hafnia and Aker BP
Significant diversification
The 3 months correlation between Hafnia and Aker is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hafnia and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA and Hafnia 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 Hafnia are associated (or correlated) with Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Hafnia i.e., Hafnia and Aker BP go up and down completely randomly.
Pair Corralation between Hafnia and Aker BP
Assuming the 90 days trading horizon Hafnia is expected to generate 1.23 times more return on investment than Aker BP. However, Hafnia is 1.23 times more volatile than Aker BP ASA. It trades about 0.02 of its potential returns per unit of risk. Aker BP ASA is currently generating about -0.03 per unit of risk. If you would invest 6,192 in Hafnia on September 3, 2024 and sell it today you would earn a total of 178.00 from holding Hafnia or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.13% |
| Values | Daily Returns |
Hafnia vs. Aker BP ASA
Performance |
| Timeline |
| Hafnia |
| Aker BP ASA |
Hafnia and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hafnia and Aker BP
The main advantage of trading using opposite Hafnia and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hafnia position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.The idea behind Hafnia and Aker BP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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