Correlation Between Kongsberg Automotive and Aker BP
Can any of the company-specific risk be diversified away by investing in both Kongsberg Automotive 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 Kongsberg Automotive and Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kongsberg Automotive Holding and Aker BP ASA, you can compare the effects of market volatilities on Kongsberg Automotive 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 Kongsberg Automotive with a short position of Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kongsberg Automotive and Aker BP.
Diversification Opportunities for Kongsberg Automotive and Aker BP
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Kongsberg and Aker is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Automotive Holding 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 Kongsberg Automotive 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 Kongsberg Automotive Holding 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 Kongsberg Automotive i.e., Kongsberg Automotive and Aker BP go up and down completely randomly.
Pair Corralation between Kongsberg Automotive and Aker BP
Assuming the 90 days trading horizon Kongsberg Automotive Holding is expected to generate 1.95 times more return on investment than Aker BP. However, Kongsberg Automotive is 1.95 times more volatile than Aker BP ASA. It trades about 0.04 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.01 per unit of risk. If you would invest 153.00 in Kongsberg Automotive Holding on November 3, 2024 and sell it today you would earn a total of 17.00 from holding Kongsberg Automotive Holding or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kongsberg Automotive Holding vs. Aker BP ASA
Performance |
| Timeline |
| Kongsberg Automotive |
| Aker BP ASA |
Kongsberg Automotive and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kongsberg Automotive and Aker BP
The main advantage of trading using opposite Kongsberg Automotive and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kongsberg Automotive 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 Kongsberg Automotive Holding 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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