Correlation Between DNB NOR and North Energy

Can any of the company-specific risk be diversified away by investing in both DNB NOR 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 DNB NOR and North Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DNB NOR KAPFORV and North Energy ASA, you can compare the effects of market volatilities on DNB NOR 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 DNB NOR with a short position of North Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of DNB NOR and North Energy.

Diversification Opportunities for DNB NOR and North Energy

-0.23

Correlation Coefficient

DNB NOR  North Energy

Very good diversification

The 3 months correlation between DNB and North is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding DNB NOR KAPFORV 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 DNB NOR 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 NOR KAPFORV 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 DNB NOR i.e., DNB NOR and North Energy go up and down completely randomly.

Pair Corralation between DNB NOR and North Energy

Assuming the 90 days trading horizon DNB NOR KAPFORV is expected to under-perform the North Energy. But the fund apears to be less risky and, when comparing its historical volatility, DNB NOR KAPFORV is 9.86 times less risky than North Energy. The fund trades about -0.01 of its potential returns per unit of risk. The North Energy ASA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  250.00  in North Energy ASA on September 18, 2024 and sell it today you would earn a total of  10.00  from holding North Energy ASA or generate 4.0% return on investment over 90 days.

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

DNB NOR KAPFORV  vs.  North Energy ASA

DNB NOR KAPFORV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DNB NOR KAPFORV has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, DNB NOR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 DNB NOR and North Energy

The main advantage of trading using opposite DNB NOR and North Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DNB NOR 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 DNB NOR KAPFORV 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.