Correlation Between DnB ASA and Zalaris ASA

Can any of the company-specific risk be diversified away by investing in both DnB ASA and Zalaris 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 Zalaris 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 Zalaris ASA, you can compare the effects of market volatilities on DnB ASA and Zalaris 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 Zalaris ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of DnB ASA and Zalaris ASA.

Diversification Opportunities for DnB ASA and Zalaris ASA

-0.33

Correlation Coefficient

DnB ASA  Zalaris ASA

Very good diversification

The 3 months correlation between DnB and Zalaris is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding DnB ASA and Zalaris ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zalaris 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 Zalaris ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zalaris ASA has no effect on the direction of DnB ASA i.e., DnB ASA and Zalaris ASA go up and down completely randomly.

Pair Corralation between DnB ASA and Zalaris ASA

Assuming the 90 days trading horizon DnB ASA is expected to generate 3.24 times less return on investment than Zalaris ASA. But when comparing it to its historical volatility, DnB ASA is 1.84 times less risky than Zalaris ASA. It trades about 0.07 of its potential returns per unit of risk. Zalaris ASA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,070  in Zalaris ASA on September 4, 2024 and sell it today you would earn a total of  2,930  from holding Zalaris ASA or generate 71.99% return on investment over 90 days.

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

DnB ASA  vs.  Zalaris ASA

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 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.

Zalaris ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zalaris ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Zalaris ASA 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 DnB ASA and Zalaris ASA

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

The idea behind DnB ASA and Zalaris 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.