Correlation Between DnB ASA and Cambi ASA

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

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

Diversification Opportunities for DnB ASA and Cambi ASA

0.55

Correlation Coefficient

DnB ASA  Cambi ASA

Very weak diversification

The 3 months correlation between DnB and Cambi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding DnB ASA and Cambi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambi 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 Cambi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambi ASA has no effect on the direction of DnB ASA i.e., DnB ASA and Cambi ASA go up and down completely randomly.

Pair Corralation between DnB ASA and Cambi ASA

Assuming the 90 days trading horizon DnB ASA is expected to generate 1.09 times less return on investment than Cambi ASA. But when comparing it to its historical volatility, DnB ASA is 3.25 times less risky than Cambi ASA. It trades about 0.34 of its potential returns per unit of risk. Cambi ASA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Cambi ASA on December 29, 2024 and sell it today you would earn a total of  310.00  from holding Cambi ASA or generate 21.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

DnB ASA  vs.  Cambi ASA

DnB ASA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in DnB ASA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, DnB ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cambi ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambi ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Cambi ASA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DnB ASA and Cambi ASA

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

The idea behind DnB ASA and Cambi 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.