Correlation Between Yara International and Aker Solutions

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

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

Diversification Opportunities for Yara International and Aker Solutions

-0.42

Correlation Coefficient

Yara International  Aker Solutions

Very good diversification

The 3 months correlation between Yara and Aker is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA and Yara International 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 Yara International ASA are associated (or correlated) with Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of Yara International i.e., Yara International and Aker Solutions go up and down completely randomly.

Pair Corralation between Yara International and Aker Solutions

Assuming the 90 days trading horizon Yara International is expected to generate 5.42 times less return on investment than Aker Solutions. But when comparing it to its historical volatility, Yara International ASA is 2.21 times less risky than Aker Solutions. It trades about 0.06 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,365  in Aker Solutions ASA on September 14, 2024 and sell it today you would earn a total of  691.00  from holding Aker Solutions ASA or generate 29.22% return on investment over 90 days.

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

Yara International ASA  vs.  Aker Solutions ASA

Yara International ASA

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Yara International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aker Solutions ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker Solutions disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yara International and Aker Solutions

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

The idea behind Yara International ASA and Aker Solutions 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.