Correlation Between Storebrand ASA and Multiconsult

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

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

Diversification Opportunities for Storebrand ASA and Multiconsult

0.71

Correlation Coefficient

Storebrand ASA  Multiconsult

Poor diversification

The 3 months correlation between Storebrand and Multiconsult is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Storebrand ASA and Multiconsult AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiconsult AS and Storebrand 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 Storebrand ASA are associated (or correlated) with Multiconsult. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiconsult AS has no effect on the direction of Storebrand ASA i.e., Storebrand ASA and Multiconsult go up and down completely randomly.

Pair Corralation between Storebrand ASA and Multiconsult

Assuming the 90 days trading horizon Storebrand ASA is expected to generate 1.94 times less return on investment than Multiconsult. In addition to that, Storebrand ASA is 1.09 times more volatile than Multiconsult AS. It trades about 0.05 of its total potential returns per unit of risk. Multiconsult AS is currently generating about 0.11 per unit of volatility. If you would invest  17,900  in Multiconsult AS on September 25, 2024 and sell it today you would earn a total of  1,400  from holding Multiconsult AS or generate 7.82% return on investment over 90 days.

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

Storebrand ASA  vs.  Multiconsult AS

Storebrand ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand ASA are ranked lower than 4 (%) 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.

Multiconsult AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multiconsult AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Multiconsult may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Storebrand ASA and Multiconsult

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

The idea behind Storebrand ASA and Multiconsult 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.