Correlation Between Aker ASA and Edda Wind

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

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

Diversification Opportunities for Aker ASA and Edda Wind

0.08

Correlation Coefficient

Aker ASA  Edda Wind

Significant diversification

The 3 months correlation between Aker and Edda is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Edda Wind ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edda Wind ASA and Aker ASA 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 ASA are associated (or correlated) with Edda Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edda Wind ASA has no effect on the direction of Aker ASA i.e., Aker ASA and Edda Wind go up and down completely randomly.

Pair Corralation between Aker ASA and Edda Wind

Assuming the 90 days trading horizon Aker ASA is expected to generate 0.56 times more return on investment than Edda Wind. However, Aker ASA is 1.8 times less risky than Edda Wind. It trades about 0.09 of its potential returns per unit of risk. Edda Wind ASA is currently generating about -0.02 per unit of risk. If you would invest  53,476  in Aker ASA on September 4, 2024 and sell it today you would earn a total of  4,024  from holding Aker ASA or generate 7.52% return on investment over 90 days.

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

Aker ASA  vs.  Edda Wind ASA

Aker ASA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aker ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Edda Wind ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aker ASA and Edda Wind

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

The idea behind Aker ASA and Edda Wind 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..