Correlation Between Aker Solutions and Subsea 7

Can any of the company-specific risk be diversified away by investing in both Aker Solutions and Subsea 7 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 Solutions and Subsea 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aker Solutions ASA and Subsea 7 SA, you can compare the effects of market volatilities on Aker Solutions and Subsea 7 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 Solutions with a short position of Subsea 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker Solutions and Subsea 7.

Diversification Opportunities for Aker Solutions and Subsea 7

0.08

Correlation Coefficient

Aker Solutions  Subsea 7

Significant diversification

The 3 months correlation between Aker and Subsea is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aker Solutions ASA and Subsea 7 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subsea 7 SA and Aker Solutions 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 Solutions ASA are associated (or correlated) with Subsea 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subsea 7 SA has no effect on the direction of Aker Solutions i.e., Aker Solutions and Subsea 7 go up and down completely randomly.

Pair Corralation between Aker Solutions and Subsea 7

Assuming the 90 days trading horizon Aker Solutions ASA is expected to generate 1.43 times more return on investment than Subsea 7. However, Aker Solutions is 1.43 times more volatile than Subsea 7 SA. It trades about 0.14 of its potential returns per unit of risk. Subsea 7 SA is currently generating about -0.04 per unit of risk. If you would invest  2,523  in Aker Solutions ASA on September 2, 2024 and sell it today you would earn a total of  623.00  from holding Aker Solutions ASA or generate 24.69% return on investment over 90 days.

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

Aker Solutions ASA  vs.  Subsea 7 SA

Aker Solutions ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker Solutions disclosed solid returns over the last few months and may actually be approaching a breakup point.

Subsea 7 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Subsea 7 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 Solutions and Subsea 7

The main advantage of trading using opposite Aker Solutions and Subsea 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Solutions position performs unexpectedly, Subsea 7 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 Subsea 7 will offset losses from the drop in Subsea 7's long position.

The idea behind Aker Solutions ASA and Subsea 7 SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..