Correlation Between Aker BP and Storebrand ASA

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

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

Diversification Opportunities for Aker BP and Storebrand ASA

0.08

Correlation Coefficient

Aker BP  Storebrand ASA

Significant diversification

The 3 months correlation between Aker and Storebrand is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA and Aker BP 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 Aker BP ASA are associated (or correlated) with Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of Aker BP i.e., Aker BP and Storebrand ASA go up and down completely randomly.

Pair Corralation between Aker BP and Storebrand ASA

Assuming the 90 days trading horizon Aker BP is expected to generate 2.47 times less return on investment than Storebrand ASA. In addition to that, Aker BP is 1.69 times more volatile than Storebrand ASA. It trades about 0.02 of its total potential returns per unit of risk. Storebrand ASA is currently generating about 0.08 per unit of volatility. If you would invest  11,550  in Storebrand ASA on September 12, 2024 and sell it today you would earn a total of  700.00  from holding Storebrand ASA or generate 6.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Aker BP ASA  vs.  Storebrand ASA

Aker BP ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Aker BP is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Storebrand ASA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Storebrand ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aker BP and Storebrand ASA

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

The idea behind Aker BP ASA and Storebrand 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.