Correlation Between Aker Carbon and Vow ASA

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

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

Diversification Opportunities for Aker Carbon and Vow ASA

-0.48

Correlation Coefficient

Aker Carbon  Vow ASA

Very good diversification

The 3 months correlation between Aker and Vow is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA and Aker Carbon 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 Aker Carbon Capture are associated (or correlated) with Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of Aker Carbon i.e., Aker Carbon and Vow ASA go up and down completely randomly.

Pair Corralation between Aker Carbon and Vow ASA

Assuming the 90 days trading horizon Aker Carbon Capture is expected to generate 0.42 times more return on investment than Vow ASA. However, Aker Carbon Capture is 2.39 times less risky than Vow ASA. It trades about 0.13 of its potential returns per unit of risk. Vow ASA is currently generating about 0.03 per unit of risk. If you would invest  597.00  in Aker Carbon Capture on November 29, 2024 and sell it today you would earn a total of  127.00  from holding Aker Carbon Capture or generate 21.27% return on investment over 90 days.

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

Aker Carbon Capture  vs.  Vow ASA

Aker Carbon Capture

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Carbon Capture are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Aker Carbon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Vow ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vow ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Vow ASA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Aker Carbon and Vow ASA

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

The idea behind Aker Carbon Capture and Vow 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 Transaction History module to view history of all your transactions and understand their impact on performance.