Correlation Between North Energy and Aker Solutions
Can any of the company-specific risk be diversified away by investing in both North Energy and Aker Solutions 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 North Energy and Aker Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Energy ASA and Aker Solutions ASA, you can compare the effects of market volatilities on North Energy and Aker Solutions 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 North Energy with a short position of Aker Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Energy and Aker Solutions.
Diversification Opportunities for North Energy and Aker Solutions
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between North and Aker is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding North Energy ASA and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA and North Energy 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 North Energy ASA are associated (or correlated) with Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of North Energy i.e., North Energy and Aker Solutions go up and down completely randomly.
Pair Corralation between North Energy and Aker Solutions
Assuming the 90 days trading horizon North Energy is expected to generate 1.79 times less return on investment than Aker Solutions. But when comparing it to its historical volatility, North Energy ASA is 1.37 times less risky than Aker Solutions. It trades about 0.05 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,044 in Aker Solutions ASA on September 1, 2024 and sell it today you would earn a total of 102.00 from holding Aker Solutions ASA or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
North Energy ASA vs. Aker Solutions ASA
Performance |
| Timeline |
| North Energy ASA |
| Aker Solutions ASA |
North Energy and Aker Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Energy and Aker Solutions
The main advantage of trading using opposite North Energy and Aker Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Energy position performs unexpectedly, Aker Solutions 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 Solutions will offset losses from the drop in Aker Solutions' long position.| North Energy vs. Skue Sparebank | North Energy vs. Aasen Sparebank | North Energy vs. Proximar Seafood AS | North Energy vs. Nidaros Sparebank |
| Aker Solutions vs. Aker ASA | Aker Solutions vs. Subsea 7 SA | Aker Solutions vs. TGS NOPEC Geophysical | Aker Solutions vs. BW Offshore |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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