Correlation Between Kongsberg Gruppen and North Energy

Can any of the company-specific risk be diversified away by investing in both Kongsberg Gruppen and North Energy 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 Kongsberg Gruppen and North Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kongsberg Gruppen and North Energy

0.75

Correlation Coefficient

Kongsberg Gruppen  North Energy

Poor diversification

The 3 months correlation between Kongsberg and North is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Gruppen ASA and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy ASA and Kongsberg Gruppen 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 Kongsberg Gruppen ASA are associated (or correlated) with North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Kongsberg Gruppen i.e., Kongsberg Gruppen and North Energy go up and down completely randomly.

Pair Corralation between Kongsberg Gruppen and North Energy

Assuming the 90 days trading horizon Kongsberg Gruppen ASA is expected to generate 1.2 times more return on investment than North Energy. However, Kongsberg Gruppen is 1.2 times more volatile than North Energy ASA. It trades about 0.22 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.05 per unit of risk. If you would invest  100,257  in Kongsberg Gruppen ASA on September 18, 2024 and sell it today you would earn a total of  28,843  from holding Kongsberg Gruppen ASA or generate 28.77% return on investment over 90 days.

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

Kongsberg Gruppen ASA  vs.  North Energy ASA

Kongsberg Gruppen ASA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Gruppen ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Kongsberg Gruppen disclosed solid returns over the last few months and may actually be approaching a breakup point.

North Energy ASA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North Energy ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, North Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kongsberg Gruppen and North Energy

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

The idea behind Kongsberg Gruppen ASA and North Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..