Correlation Between DnB ASA and Arctic Fish

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

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

Diversification Opportunities for DnB ASA and Arctic Fish

0.89

Correlation Coefficient

DnB ASA  Arctic Fish

Very poor diversification

The 3 months correlation between DnB and Arctic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DnB ASA and Arctic Fish Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Fish Holding and DnB 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 DnB ASA are associated (or correlated) with Arctic Fish. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Fish Holding has no effect on the direction of DnB ASA i.e., DnB ASA and Arctic Fish go up and down completely randomly.

Pair Corralation between DnB ASA and Arctic Fish

Assuming the 90 days trading horizon DnB ASA is expected to generate 11.86 times less return on investment than Arctic Fish. But when comparing it to its historical volatility, DnB ASA is 3.89 times less risky than Arctic Fish. It trades about 0.05 of its potential returns per unit of risk. Arctic Fish Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,050  in Arctic Fish Holding on August 30, 2024 and sell it today you would earn a total of  1,950  from holding Arctic Fish Holding or generate 38.61% return on investment over 90 days.

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

DnB ASA  vs.  Arctic Fish Holding

DnB ASA

Risk-Adjusted Performance

3 of 100

Insignificant

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

Arctic Fish Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Fish Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Arctic Fish displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DnB ASA and Arctic Fish

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

The idea behind DnB ASA and Arctic Fish Holding 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.