Correlation Between International Consolidated and Aker BP

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

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

Diversification Opportunities for International Consolidated and Aker BP

0.5

Correlation Coefficient

International Consolidated  Aker BP

Very weak diversification

The 3 months correlation between International and Aker is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Com 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 International Consolidated 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 International Consolidated Companies 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 International Consolidated i.e., International Consolidated and Aker BP go up and down completely randomly.

Pair Corralation between International Consolidated and Aker BP

Given the investment horizon of 90 days International Consolidated Companies is expected to generate 24.06 times more return on investment than Aker BP. However, International Consolidated is 24.06 times more volatile than Aker BP ASA. It trades about 0.18 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.04 per unit of risk. If you would invest  0.00  in International Consolidated Companies on October 24, 2024 and sell it today you would earn a total of  5.25  from holding International Consolidated Companies or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

International Consolidated Com  vs.  Aker BP ASA

International Consolidated

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aker BP ASA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Aker BP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Consolidated and Aker BP

The main advantage of trading using opposite International Consolidated and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated Companies 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.