Correlation Between Aasen Sparebank and Norske Skog

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

By analyzing existing cross correlation between Aasen Sparebank and Norske Skog Asa, you can compare the effects of market volatilities on Aasen Sparebank and Norske Skog 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 Aasen Sparebank with a short position of Norske Skog. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aasen Sparebank and Norske Skog.

Diversification Opportunities for Aasen Sparebank and Norske Skog

0.37

Correlation Coefficient

Aasen Sparebank  Norske Skog

Weak diversification

The 3 months correlation between Aasen and Norske is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aasen Sparebank and Norske Skog Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norske Skog Asa and Aasen Sparebank 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 Aasen Sparebank are associated (or correlated) with Norske Skog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norske Skog Asa has no effect on the direction of Aasen Sparebank i.e., Aasen Sparebank and Norske Skog go up and down completely randomly.

Pair Corralation between Aasen Sparebank and Norske Skog

Assuming the 90 days trading horizon Aasen Sparebank is expected to generate 0.3 times more return on investment than Norske Skog. However, Aasen Sparebank is 3.38 times less risky than Norske Skog. It trades about 0.03 of its potential returns per unit of risk. Norske Skog Asa is currently generating about -0.01 per unit of risk. If you would invest  11,568  in Aasen Sparebank on December 28, 2024 and sell it today you would earn a total of  232.00  from holding Aasen Sparebank or generate 2.01% return on investment over 90 days.

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

Aasen Sparebank  vs.  Norske Skog Asa

Aasen Sparebank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aasen Sparebank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Aasen Sparebank is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Norske Skog Asa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norske Skog Asa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Norske Skog is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aasen Sparebank and Norske Skog

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

The idea behind Aasen Sparebank and Norske Skog 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 Global Correlations module to find global opportunities by holding instruments from different markets.