Correlation Between Storebrand Global and KLP AksjeGlobal

Can any of the company-specific risk be diversified away by investing in both Storebrand Global and KLP AksjeGlobal 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 Global and KLP AksjeGlobal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Storebrand Global Solutions and KLP AksjeGlobal Flerfaktor, you can compare the effects of market volatilities on Storebrand Global and KLP AksjeGlobal 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 Global with a short position of KLP AksjeGlobal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Storebrand Global and KLP AksjeGlobal.

Diversification Opportunities for Storebrand Global and KLP AksjeGlobal

0.66

Correlation Coefficient

Storebrand Global  KLP AksjeGlobal

Poor diversification

The 3 months correlation between Storebrand and KLP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Storebrand Global Solutions and KLP AksjeGlobal Flerfaktor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLP AksjeGlobal Fler and Storebrand Global 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 Global Solutions are associated (or correlated) with KLP AksjeGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLP AksjeGlobal Fler has no effect on the direction of Storebrand Global i.e., Storebrand Global and KLP AksjeGlobal go up and down completely randomly.

Pair Corralation between Storebrand Global and KLP AksjeGlobal

Assuming the 90 days trading horizon Storebrand Global Solutions is expected to generate 1.82 times more return on investment than KLP AksjeGlobal. However, Storebrand Global is 1.82 times more volatile than KLP AksjeGlobal Flerfaktor. It trades about 0.08 of its potential returns per unit of risk. KLP AksjeGlobal Flerfaktor is currently generating about 0.13 per unit of risk. If you would invest  229,787  in Storebrand Global Solutions on September 21, 2024 and sell it today you would earn a total of  7,647  from holding Storebrand Global Solutions or generate 3.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Storebrand Global Solutions  vs.  KLP AksjeGlobal Flerfaktor

Storebrand Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand Global Solutions are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Storebrand Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

KLP AksjeGlobal Fler

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KLP AksjeGlobal Flerfaktor are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, KLP AksjeGlobal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Storebrand Global and KLP AksjeGlobal

The main advantage of trading using opposite Storebrand Global and KLP AksjeGlobal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Storebrand Global position performs unexpectedly, KLP AksjeGlobal 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 KLP AksjeGlobal will offset losses from the drop in KLP AksjeGlobal's long position.

The idea behind Storebrand Global Solutions and KLP AksjeGlobal Flerfaktor 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.