Correlation Between DNB NOR and Pexip Holding

Can any of the company-specific risk be diversified away by investing in both DNB NOR and Pexip 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 NOR and Pexip Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DNB NOR KAPFORV and Pexip Holding ASA, you can compare the effects of market volatilities on DNB NOR and Pexip 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 NOR with a short position of Pexip Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of DNB NOR and Pexip Holding.

Diversification Opportunities for DNB NOR and Pexip Holding

0.5

Correlation Coefficient

DNB NOR  Pexip Holding

Very weak diversification

The 3 months correlation between DNB and Pexip is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding DNB NOR KAPFORV and Pexip Holding ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pexip Holding ASA and DNB NOR 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 NOR KAPFORV are associated (or correlated) with Pexip Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pexip Holding ASA has no effect on the direction of DNB NOR i.e., DNB NOR and Pexip Holding go up and down completely randomly.

Pair Corralation between DNB NOR and Pexip Holding

Assuming the 90 days trading horizon DNB NOR KAPFORV is expected to generate 0.18 times more return on investment than Pexip Holding. However, DNB NOR KAPFORV is 5.54 times less risky than Pexip Holding. It trades about -0.06 of its potential returns per unit of risk. Pexip Holding ASA is currently generating about -0.07 per unit of risk. If you would invest  109,773  in DNB NOR KAPFORV on November 28, 2024 and sell it today you would lose (1,208) from holding DNB NOR KAPFORV or give up 1.1% of portfolio value over 90 days.

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

DNB NOR KAPFORV  vs.  Pexip Holding ASA

DNB NOR KAPFORV

Risk-Adjusted Performance

Very Weak

Over the last 90 days DNB NOR KAPFORV has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, DNB NOR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pexip Holding ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pexip Holding ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with DNB NOR and Pexip Holding

The main advantage of trading using opposite DNB NOR and Pexip Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DNB NOR position performs unexpectedly, Pexip 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 Pexip Holding will offset losses from the drop in Pexip Holding's long position.

The idea behind DNB NOR KAPFORV and Pexip Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.