Correlation Between DnB ASA and Aker BP

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

By analyzing existing cross correlation between DnB ASA and Aker BP ASA, you can compare the effects of market volatilities on DnB ASA and Aker BP 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 Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of DnB ASA and Aker BP.

Diversification Opportunities for DnB ASA and Aker BP

0.61

Correlation Coefficient

DnB ASA  Aker BP

Poor diversification

The 3 months correlation between DnB and Aker is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DnB ASA and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA 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 Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of DnB ASA i.e., DnB ASA and Aker BP go up and down completely randomly.

Pair Corralation between DnB ASA and Aker BP

Assuming the 90 days trading horizon DnB ASA is expected to generate 0.51 times more return on investment than Aker BP. However, DnB ASA is 1.96 times less risky than Aker BP. It trades about 0.19 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.07 per unit of risk. If you would invest  23,130  in DnB ASA on November 28, 2024 and sell it today you would earn a total of  2,280  from holding DnB ASA or generate 9.86% return on investment over 90 days.

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

DnB ASA  vs.  Aker BP ASA

DnB ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DnB ASA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, DnB ASA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Aker BP ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Aker BP may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with DnB ASA and Aker BP

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

The idea behind DnB ASA and Aker BP 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.