Correlation Between Atea ASA and Storebrand ASA

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

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

Diversification Opportunities for Atea ASA and Storebrand ASA

0.05

Correlation Coefficient

Atea ASA  Storebrand ASA

Significant diversification

The 3 months correlation between Atea and Storebrand is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Atea ASA and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA and Atea ASA 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 Atea ASA are associated (or correlated) with Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of Atea ASA i.e., Atea ASA and Storebrand ASA go up and down completely randomly.

Pair Corralation between Atea ASA and Storebrand ASA

Assuming the 90 days trading horizon Atea ASA is expected to under-perform the Storebrand ASA. But the stock apears to be less risky and, when comparing its historical volatility, Atea ASA is 1.03 times less risky than Storebrand ASA. The stock trades about -0.01 of its potential returns per unit of risk. The Storebrand ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,260  in Storebrand ASA on December 1, 2024 and sell it today you would lose (10.00) from holding Storebrand ASA or give up 0.08% of portfolio value over 90 days.

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

Atea ASA  vs.  Storebrand ASA

Atea ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atea ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Atea ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Storebrand ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Storebrand ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Storebrand ASA 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 Atea ASA and Storebrand ASA

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

The idea behind Atea ASA and Storebrand 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.