Correlation Between Aker BP and MPC Container

Can any of the company-specific risk be diversified away by investing in both Aker BP and MPC Container 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 MPC Container 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 MPC Container Ships, you can compare the effects of market volatilities on Aker BP and MPC Container 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 MPC Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and MPC Container.

Diversification Opportunities for Aker BP and MPC Container

0.18

Correlation Coefficient

Aker BP  MPC Container

Average diversification

The 3 months correlation between Aker and MPC is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and MPC Container Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPC Container Ships 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 MPC Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPC Container Ships has no effect on the direction of Aker BP i.e., Aker BP and MPC Container go up and down completely randomly.

Pair Corralation between Aker BP and MPC Container

Assuming the 90 days trading horizon Aker BP ASA is expected to generate 0.86 times more return on investment than MPC Container. However, Aker BP ASA is 1.16 times less risky than MPC Container. It trades about 0.12 of its potential returns per unit of risk. MPC Container Ships is currently generating about -0.13 per unit of risk. If you would invest  21,533  in Aker BP ASA on December 29, 2024 and sell it today you would earn a total of  2,867  from holding Aker BP ASA or generate 13.31% return on investment over 90 days.

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

Aker BP ASA  vs.  MPC Container Ships

Aker BP ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Aker BP displayed solid returns over the last few months and may actually be approaching a breakup point.

MPC Container Ships

Risk-Adjusted Performance

Very Weak

Over the last 90 days MPC Container Ships has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aker BP and MPC Container

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

The idea behind Aker BP ASA and MPC Container Ships 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.