Correlation Between Bien Sparebank and Awilco Drilling

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

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

Diversification Opportunities for Bien Sparebank and Awilco Drilling

0.02

Correlation Coefficient

Bien Sparebank  Awilco Drilling

Significant diversification

The 3 months correlation between Bien and Awilco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bien Sparebank ASA and Awilco Drilling PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco Drilling PLC and Bien Sparebank 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 Bien Sparebank ASA are associated (or correlated) with Awilco Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco Drilling PLC has no effect on the direction of Bien Sparebank i.e., Bien Sparebank and Awilco Drilling go up and down completely randomly.

Pair Corralation between Bien Sparebank and Awilco Drilling

Assuming the 90 days trading horizon Bien Sparebank ASA is expected to generate 0.4 times more return on investment than Awilco Drilling. However, Bien Sparebank ASA is 2.53 times less risky than Awilco Drilling. It trades about 0.28 of its potential returns per unit of risk. Awilco Drilling PLC is currently generating about 0.02 per unit of risk. If you would invest  9,100  in Bien Sparebank ASA on September 3, 2024 and sell it today you would earn a total of  3,300  from holding Bien Sparebank ASA or generate 36.26% return on investment over 90 days.

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

Bien Sparebank ASA  vs.  Awilco Drilling PLC

Bien Sparebank ASA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bien Sparebank ASA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Bien Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Awilco Drilling PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Awilco Drilling PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Awilco Drilling 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 Bien Sparebank and Awilco Drilling

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

The idea behind Bien Sparebank ASA and Awilco Drilling PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.