Correlation Between AF Gruppen and Norske Skog

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

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

Diversification Opportunities for AF Gruppen and Norske Skog

-0.17

Correlation Coefficient

AF Gruppen  Norske Skog

Good diversification

The 3 months correlation between AFG and Norske is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA 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 AF Gruppen 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 AF Gruppen ASA 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 AF Gruppen i.e., AF Gruppen and Norske Skog go up and down completely randomly.

Pair Corralation between AF Gruppen and Norske Skog

Assuming the 90 days trading horizon AF Gruppen ASA is expected to generate 0.34 times more return on investment than Norske Skog. However, AF Gruppen ASA is 2.97 times less risky than Norske Skog. It trades about -0.04 of its potential returns per unit of risk. Norske Skog Asa is currently generating about -0.02 per unit of risk. If you would invest  14,840  in AF Gruppen ASA on December 29, 2024 and sell it today you would lose (780.00) from holding AF Gruppen ASA or give up 5.26% of portfolio value over 90 days.

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

AF Gruppen ASA  vs.  Norske Skog Asa

AF Gruppen ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days AF Gruppen ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, AF Gruppen is not utilizing all of its potentials. The latest 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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AF Gruppen and Norske Skog

The main advantage of trading using opposite AF Gruppen and Norske Skog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AF Gruppen 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 AF Gruppen ASA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.