Correlation Between Storebrand ASA and Telenor ASA
Can any of the company-specific risk be diversified away by investing in both Storebrand ASA and Telenor ASA 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 Telenor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Storebrand ASA and Telenor ASA, you can compare the effects of market volatilities on Storebrand ASA and Telenor ASA 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 Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Storebrand ASA and Telenor ASA.
Diversification Opportunities for Storebrand ASA and Telenor ASA
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Storebrand and Telenor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Storebrand ASA and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of Storebrand ASA i.e., Storebrand ASA and Telenor ASA go up and down completely randomly.
Pair Corralation between Storebrand ASA and Telenor ASA
Assuming the 90 days trading horizon Storebrand ASA is expected to generate 1.01 times more return on investment than Telenor ASA. However, Storebrand ASA is 1.01 times more volatile than Telenor ASA. It trades about 0.14 of its potential returns per unit of risk. Telenor ASA is currently generating about 0.07 per unit of risk. If you would invest 11,410 in Storebrand ASA on November 2, 2024 and sell it today you would earn a total of 1,970 from holding Storebrand ASA or generate 17.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Storebrand ASA vs. Telenor ASA
Performance |
| Timeline |
| Storebrand ASA |
| Telenor ASA |
Storebrand ASA and Telenor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Storebrand ASA and Telenor ASA
The main advantage of trading using opposite Storebrand ASA and Telenor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Storebrand ASA position performs unexpectedly, Telenor ASA 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 Telenor ASA will offset losses from the drop in Telenor ASA's long position.| Storebrand ASA vs. Telenor ASA | Storebrand ASA vs. Orkla ASA | Storebrand ASA vs. Gjensidige Forsikring ASA | Storebrand ASA vs. Equinor ASA |
| Telenor ASA vs. Orkla ASA | Telenor ASA vs. DnB ASA | Telenor ASA vs. Yara International ASA | Telenor ASA vs. Storebrand 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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