Correlation Between Orkla ASA and Aker Solutions
Can any of the company-specific risk be diversified away by investing in both Orkla ASA 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 Orkla ASA and Aker Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orkla ASA and Aker Solutions ASA, you can compare the effects of market volatilities on Orkla ASA 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 Orkla ASA with a short position of Aker Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orkla ASA and Aker Solutions.
Diversification Opportunities for Orkla ASA and Aker Solutions
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Orkla and Aker is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Orkla 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 Orkla 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 Orkla 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 Orkla ASA i.e., Orkla ASA and Aker Solutions go up and down completely randomly.
Pair Corralation between Orkla ASA and Aker Solutions
Assuming the 90 days trading horizon Orkla ASA is expected to generate 15.44 times less return on investment than Aker Solutions. But when comparing it to its historical volatility, Orkla ASA is 2.72 times less risky than Aker Solutions. It trades about 0.04 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,313 in Aker Solutions ASA on August 28, 2024 and sell it today you would earn a total of 687.00 from holding Aker Solutions ASA or generate 29.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orkla ASA vs. Aker Solutions ASA
Performance |
| Timeline |
| Orkla ASA |
| Aker Solutions ASA |
Orkla ASA and Aker Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orkla ASA and Aker Solutions
The main advantage of trading using opposite Orkla ASA and Aker Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA 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.The idea behind Orkla ASA and Aker Solutions 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.| Aker Solutions vs. Subsea 7 SA | Aker Solutions vs. Aker ASA | Aker Solutions vs. Dno ASA | Aker Solutions vs. Aker Carbon Capture |
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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