Correlation Between DNB Norge and KLP AksjeNorge

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

By analyzing existing cross correlation between DNB Norge Selektiv and KLP AksjeNorge Indeks, you can compare the effects of market volatilities on DNB Norge and KLP AksjeNorge 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 DNB Norge with a short position of KLP AksjeNorge. Check out your portfolio center. Please also check ongoing floating volatility patterns of DNB Norge and KLP AksjeNorge.

Diversification Opportunities for DNB Norge and KLP AksjeNorge

0.9

Correlation Coefficient

DNB Norge  KLP AksjeNorge

Almost no diversification

The 3 months correlation between DNB and KLP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DNB Norge Selektiv and KLP AksjeNorge Indeks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLP AksjeNorge Indeks and DNB Norge 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 DNB Norge Selektiv are associated (or correlated) with KLP AksjeNorge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLP AksjeNorge Indeks has no effect on the direction of DNB Norge i.e., DNB Norge and KLP AksjeNorge go up and down completely randomly.

Pair Corralation between DNB Norge and KLP AksjeNorge

Assuming the 90 days trading horizon DNB Norge Selektiv is expected to under-perform the KLP AksjeNorge. But the fund apears to be less risky and, when comparing its historical volatility, DNB Norge Selektiv is 1.05 times less risky than KLP AksjeNorge. The fund trades about -0.12 of its potential returns per unit of risk. The KLP AksjeNorge Indeks is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  382,803  in KLP AksjeNorge Indeks on September 20, 2024 and sell it today you would lose (3,630) from holding KLP AksjeNorge Indeks or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

DNB Norge Selektiv  vs.  KLP AksjeNorge Indeks

DNB Norge Selektiv

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DNB Norge Selektiv are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, DNB Norge is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

KLP AksjeNorge Indeks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KLP AksjeNorge Indeks are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical indicators, KLP AksjeNorge is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with DNB Norge and KLP AksjeNorge

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

The idea behind DNB Norge Selektiv and KLP AksjeNorge Indeks 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.