Correlation Between Aker BP and Standard Supply

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

Diversification Opportunities for Aker BP and Standard Supply

0.08

Correlation Coefficient

Aker BP  Standard Supply

Significant diversification

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

Pair Corralation between Aker BP and Standard Supply

Assuming the 90 days trading horizon Aker BP ASA is expected to generate 0.17 times more return on investment than Standard Supply. However, Aker BP ASA is 5.82 times less risky than Standard Supply. It trades about 0.01 of its potential returns per unit of risk. Standard Supply AS is currently generating about -0.12 per unit of risk. If you would invest  22,332  in Aker BP ASA on September 15, 2024 and sell it today you would earn a total of  48.00  from holding Aker BP ASA or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Aker BP ASA  vs.  Standard Supply AS

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.

Standard Supply AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Supply AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 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 Standard Supply

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

The idea behind Aker BP ASA and Standard Supply AS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.