Correlation Between Kongsberg Gruppen and Telenor ASA

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

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

Diversification Opportunities for Kongsberg Gruppen and Telenor ASA

-0.02

Correlation Coefficient

Kongsberg Gruppen  Telenor ASA

Good diversification

The 3 months correlation between Kongsberg and Telenor is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Gruppen ASA and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA and Kongsberg Gruppen 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 Kongsberg Gruppen ASA are associated (or correlated) with Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of Kongsberg Gruppen i.e., Kongsberg Gruppen and Telenor ASA go up and down completely randomly.

Pair Corralation between Kongsberg Gruppen and Telenor ASA

Assuming the 90 days trading horizon Kongsberg Gruppen is expected to generate 1.75 times less return on investment than Telenor ASA. In addition to that, Kongsberg Gruppen is 2.35 times more volatile than Telenor ASA. It trades about 0.05 of its total potential returns per unit of risk. Telenor ASA is currently generating about 0.21 per unit of volatility. If you would invest  13,000  in Telenor ASA on November 29, 2024 and sell it today you would earn a total of  1,530  from holding Telenor ASA or generate 11.77% return on investment over 90 days.

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

Kongsberg Gruppen ASA  vs.  Telenor ASA

Kongsberg Gruppen ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Gruppen ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Kongsberg Gruppen may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Telenor ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Telenor ASA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Kongsberg Gruppen and Telenor ASA

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

The idea behind Kongsberg Gruppen ASA and Telenor 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.