Correlation Between Orkla ASA and Lea Bank
Can any of the company-specific risk be diversified away by investing in both Orkla ASA and Lea Bank 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 Lea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orkla ASA and Lea Bank ASA, you can compare the effects of market volatilities on Orkla ASA and Lea Bank 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 Lea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orkla ASA and Lea Bank.
Diversification Opportunities for Orkla ASA and Lea Bank
Poor diversification
The 3 months correlation between Orkla and Lea is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank 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 Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Orkla ASA i.e., Orkla ASA and Lea Bank go up and down completely randomly.
Pair Corralation between Orkla ASA and Lea Bank
Assuming the 90 days trading horizon Orkla ASA is expected to generate 0.5 times more return on investment than Lea Bank. However, Orkla ASA is 1.98 times less risky than Lea Bank. It trades about 0.09 of its potential returns per unit of risk. Lea Bank ASA is currently generating about 0.03 per unit of risk. If you would invest 6,140 in Orkla ASA on August 29, 2024 and sell it today you would earn a total of 3,890 from holding Orkla ASA or generate 63.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orkla ASA vs. Lea Bank ASA
Performance |
| Timeline |
| Orkla ASA |
| Lea Bank ASA |
Orkla ASA and Lea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orkla ASA and Lea Bank
The main advantage of trading using opposite Orkla ASA and Lea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA position performs unexpectedly, Lea Bank 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 Lea Bank will offset losses from the drop in Lea Bank's long position.The idea behind Orkla ASA and Lea Bank 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.| Lea Bank vs. Elkem ASA | Lea Bank vs. Vow ASA | Lea Bank vs. North Energy ASA | Lea Bank vs. Arcticzymes Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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