Correlation Between Aker BP and Akastor ASA

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

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

Diversification Opportunities for Aker BP and Akastor ASA

0.2

Correlation Coefficient

Aker BP  Akastor ASA

Modest diversification

The 3 months correlation between Aker and Akastor is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Akastor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akastor ASA and Aker BP 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 BP ASA are associated (or correlated) with Akastor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akastor ASA has no effect on the direction of Aker BP i.e., Aker BP and Akastor ASA go up and down completely randomly.

Pair Corralation between Aker BP and Akastor ASA

Assuming the 90 days trading horizon Aker BP ASA is expected to generate 0.66 times more return on investment than Akastor ASA. However, Aker BP ASA is 1.52 times less risky than Akastor ASA. It trades about 0.0 of its potential returns per unit of risk. Akastor ASA is currently generating about -0.03 per unit of risk. If you would invest  22,788  in Aker BP ASA on August 31, 2024 and sell it today you would lose (78.00) from holding Aker BP ASA or give up 0.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Aker BP ASA  vs.  Akastor ASA

Aker BP ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Akastor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akastor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aker BP and Akastor ASA

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

The idea behind Aker BP ASA and Akastor 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.