Correlation Between Dno ASA and Interoil Exploration

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

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

Diversification Opportunities for Dno ASA and Interoil Exploration

-0.74

Correlation Coefficient

Dno ASA  Interoil Exploration

Pay attention - limited upside

The 3 months correlation between Dno and Interoil is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dno ASA and Interoil Exploration and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interoil Exploration and and Dno 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 Dno ASA are associated (or correlated) with Interoil Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interoil Exploration and has no effect on the direction of Dno ASA i.e., Dno ASA and Interoil Exploration go up and down completely randomly.

Pair Corralation between Dno ASA and Interoil Exploration

Assuming the 90 days trading horizon Dno ASA is expected to generate 1.31 times more return on investment than Interoil Exploration. However, Dno ASA is 1.31 times more volatile than Interoil Exploration and. It trades about -0.03 of its potential returns per unit of risk. Interoil Exploration and is currently generating about -0.15 per unit of risk. If you would invest  1,277  in Dno ASA on December 2, 2024 and sell it today you would lose (40.00) from holding Dno ASA or give up 3.13% of portfolio value over 90 days.

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

Dno ASA  vs.  Interoil Exploration and

Dno ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dno ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Dno ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Interoil Exploration and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interoil Exploration and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dno ASA and Interoil Exploration

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

The idea behind Dno ASA and Interoil Exploration and 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.