Correlation Between Orkla ASA and Kongsberg Gruppen
Can any of the company-specific risk be diversified away by investing in both Orkla ASA and Kongsberg Gruppen 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 Kongsberg Gruppen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orkla ASA and Kongsberg Gruppen ASA, you can compare the effects of market volatilities on Orkla ASA and Kongsberg Gruppen 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 Kongsberg Gruppen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orkla ASA and Kongsberg Gruppen.
Diversification Opportunities for Orkla ASA and Kongsberg Gruppen
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Orkla and Kongsberg is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA and Kongsberg Gruppen ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kongsberg Gruppen 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 Kongsberg Gruppen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kongsberg Gruppen ASA has no effect on the direction of Orkla ASA i.e., Orkla ASA and Kongsberg Gruppen go up and down completely randomly.
Pair Corralation between Orkla ASA and Kongsberg Gruppen
Assuming the 90 days trading horizon Orkla ASA is expected to generate 2.19 times less return on investment than Kongsberg Gruppen. But when comparing it to its historical volatility, Orkla ASA is 2.01 times less risky than Kongsberg Gruppen. It trades about 0.13 of its potential returns per unit of risk. Kongsberg Gruppen ASA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 88,433 in Kongsberg Gruppen ASA on August 28, 2024 and sell it today you would earn a total of 40,167 from holding Kongsberg Gruppen ASA or generate 45.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orkla ASA vs. Kongsberg Gruppen ASA
Performance |
| Timeline |
| Orkla ASA |
| Kongsberg Gruppen ASA |
Orkla ASA and Kongsberg Gruppen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orkla ASA and Kongsberg Gruppen
The main advantage of trading using opposite Orkla ASA and Kongsberg Gruppen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA position performs unexpectedly, Kongsberg Gruppen 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 Kongsberg Gruppen will offset losses from the drop in Kongsberg Gruppen's long position.The idea behind Orkla ASA and Kongsberg Gruppen 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.| Kongsberg Gruppen vs. DnB ASA | Kongsberg Gruppen vs. Orkla ASA | Kongsberg Gruppen vs. Storebrand ASA | Kongsberg Gruppen vs. Yara International ASA |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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