Correlation Between Storebrand ASA and Kongsberg Gruppen
Can any of the company-specific risk be diversified away by investing in both Storebrand 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 Storebrand 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 Storebrand ASA and Kongsberg Gruppen ASA, you can compare the effects of market volatilities on Storebrand 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 Storebrand ASA with a short position of Kongsberg Gruppen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Storebrand ASA and Kongsberg Gruppen.
Diversification Opportunities for Storebrand ASA and Kongsberg Gruppen
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Storebrand and Kongsberg is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Storebrand 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 Storebrand 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 Storebrand 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 Storebrand ASA i.e., Storebrand ASA and Kongsberg Gruppen go up and down completely randomly.
Pair Corralation between Storebrand ASA and Kongsberg Gruppen
Assuming the 90 days trading horizon Storebrand ASA is expected to under-perform the Kongsberg Gruppen. But the stock apears to be less risky and, when comparing its historical volatility, Storebrand ASA is 1.43 times less risky than Kongsberg Gruppen. The stock trades about -0.09 of its potential returns per unit of risk. The Kongsberg Gruppen ASA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 116,800 in Kongsberg Gruppen ASA on August 25, 2024 and sell it today you would earn a total of 12,000 from holding Kongsberg Gruppen ASA or generate 10.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Storebrand ASA vs. Kongsberg Gruppen ASA
Performance |
| Timeline |
| Storebrand ASA |
| Kongsberg Gruppen ASA |
Storebrand ASA and Kongsberg Gruppen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Storebrand ASA and Kongsberg Gruppen
The main advantage of trading using opposite Storebrand ASA and Kongsberg Gruppen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Storebrand 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.| Storebrand ASA vs. DnB ASA | Storebrand ASA vs. Gjensidige Forsikring ASA | Storebrand ASA vs. Orkla ASA | Storebrand ASA vs. Telenor ASA |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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