Correlation Between Aker ASA and Scatec Solar

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

By analyzing existing cross correlation between Aker ASA and Scatec Solar OL, you can compare the effects of market volatilities on Aker ASA and Scatec Solar 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 Scatec Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker ASA and Scatec Solar.

Diversification Opportunities for Aker ASA and Scatec Solar

-0.09

Correlation Coefficient

Aker ASA  Scatec Solar

Good diversification

The 3 months correlation between Aker and Scatec is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Scatec Solar OL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scatec Solar OL 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 Scatec Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scatec Solar OL has no effect on the direction of Aker ASA i.e., Aker ASA and Scatec Solar go up and down completely randomly.

Pair Corralation between Aker ASA and Scatec Solar

Assuming the 90 days trading horizon Aker ASA is expected to generate 1.15 times less return on investment than Scatec Solar. But when comparing it to its historical volatility, Aker ASA is 1.04 times less risky than Scatec Solar. It trades about 0.06 of its potential returns per unit of risk. Scatec Solar OL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,730  in Scatec Solar OL on December 4, 2024 and sell it today you would earn a total of  150.00  from holding Scatec Solar OL or generate 1.94% return on investment over 90 days.

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

Aker ASA  vs.  Scatec Solar OL

Aker ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aker ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Aker ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Scatec Solar OL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aker ASA and Scatec Solar

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

The idea behind Aker ASA and Scatec Solar OL 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.