Correlation Between DnB ASA and Xplora Technologies

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

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

Diversification Opportunities for DnB ASA and Xplora Technologies

0.84

Correlation Coefficient

DnB ASA  Xplora Technologies

Very poor diversification

The 3 months correlation between DnB and Xplora is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding DnB ASA and Xplora Technologies As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xplora Technologies and DnB 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 DnB ASA are associated (or correlated) with Xplora Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xplora Technologies has no effect on the direction of DnB ASA i.e., DnB ASA and Xplora Technologies go up and down completely randomly.

Pair Corralation between DnB ASA and Xplora Technologies

Assuming the 90 days trading horizon DnB ASA is expected to generate 10.92 times less return on investment than Xplora Technologies. But when comparing it to its historical volatility, DnB ASA is 2.94 times less risky than Xplora Technologies. It trades about 0.1 of its potential returns per unit of risk. Xplora Technologies As is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,685  in Xplora Technologies As on September 5, 2024 and sell it today you would earn a total of  1,655  from holding Xplora Technologies As or generate 98.22% return on investment over 90 days.

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

DnB ASA  vs.  Xplora Technologies As

DnB ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DnB ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, DnB ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xplora Technologies

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Xplora Technologies As are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Xplora Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DnB ASA and Xplora Technologies

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

The idea behind DnB ASA and Xplora Technologies As 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.