Correlation Between DnB ASA and Tekna Holding

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

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

Diversification Opportunities for DnB ASA and Tekna Holding

-0.77

Correlation Coefficient

DnB ASA  Tekna Holding

Pay attention - limited upside

The 3 months correlation between DnB and Tekna is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding DnB ASA and Tekna Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekna Holding AS 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 Tekna Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekna Holding AS has no effect on the direction of DnB ASA i.e., DnB ASA and Tekna Holding go up and down completely randomly.

Pair Corralation between DnB ASA and Tekna Holding

Assuming the 90 days trading horizon DnB ASA is expected to generate 0.22 times more return on investment than Tekna Holding. However, DnB ASA is 4.6 times less risky than Tekna Holding. It trades about 0.1 of its potential returns per unit of risk. Tekna Holding AS is currently generating about -0.05 per unit of risk. If you would invest  21,480  in DnB ASA on September 16, 2024 and sell it today you would earn a total of  1,470  from holding DnB ASA or generate 6.84% return on investment over 90 days.

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

DnB ASA  vs.  Tekna Holding AS

DnB ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DnB ASA are ranked lower than 7 (%) 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 January 2025.

Tekna Holding AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekna Holding AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with DnB ASA and Tekna Holding

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

The idea behind DnB ASA and Tekna Holding AS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.