Correlation Between KLP AksjeEuropa and DNB Norge

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

By analyzing existing cross correlation between KLP AksjeEuropa Indeks and DNB Norge Selektiv, you can compare the effects of market volatilities on KLP AksjeEuropa and DNB Norge 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 KLP AksjeEuropa with a short position of DNB Norge. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLP AksjeEuropa and DNB Norge.

Diversification Opportunities for KLP AksjeEuropa and DNB Norge

0.02

Correlation Coefficient

KLP AksjeEuropa  DNB Norge

Significant diversification

The 3 months correlation between KLP and DNB is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding KLP AksjeEuropa Indeks and DNB Norge Selektiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB Norge Selektiv and KLP AksjeEuropa 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 KLP AksjeEuropa Indeks are associated (or correlated) with DNB Norge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB Norge Selektiv has no effect on the direction of KLP AksjeEuropa i.e., KLP AksjeEuropa and DNB Norge go up and down completely randomly.

Pair Corralation between KLP AksjeEuropa and DNB Norge

Assuming the 90 days trading horizon KLP AksjeEuropa is expected to generate 2.31 times less return on investment than DNB Norge. But when comparing it to its historical volatility, KLP AksjeEuropa Indeks is 1.02 times less risky than DNB Norge. It trades about 0.02 of its potential returns per unit of risk. DNB Norge Selektiv is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  165,193  in DNB Norge Selektiv on September 18, 2024 and sell it today you would earn a total of  3,059  from holding DNB Norge Selektiv or generate 1.85% return on investment over 90 days.

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

KLP AksjeEuropa Indeks  vs.  DNB Norge Selektiv

KLP AksjeEuropa Indeks

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KLP AksjeEuropa Indeks are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, KLP AksjeEuropa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DNB Norge Selektiv

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DNB Norge Selektiv are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, DNB Norge is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KLP AksjeEuropa and DNB Norge

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

The idea behind KLP AksjeEuropa Indeks and DNB Norge Selektiv 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.