Correlation Between Aker BP and Yara International

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

Diversification Opportunities for Aker BP and Yara International

0.36

Correlation Coefficient

Aker BP  Yara International

Weak diversification

The 3 months correlation between Aker and Yara is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Yara International ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yara International 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 Yara International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yara International ASA has no effect on the direction of Aker BP i.e., Aker BP and Yara International go up and down completely randomly.

Pair Corralation between Aker BP and Yara International

Assuming the 90 days trading horizon Aker BP ASA is expected to generate 1.07 times more return on investment than Yara International. However, Aker BP is 1.07 times more volatile than Yara International ASA. It trades about 0.12 of its potential returns per unit of risk. Yara International ASA is currently generating about 0.05 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aker BP ASA  vs.  Yara International ASA

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.

Yara International ASA

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Aker BP and Yara International

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

The idea behind Aker BP ASA and Yara International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.