Correlation Between Orkla ASA and Europris ASA

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

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

Diversification Opportunities for Orkla ASA and Europris ASA

0.89

Correlation Coefficient

Orkla ASA  Europris ASA

Very poor diversification

The 3 months correlation between Orkla and Europris is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA and Europris ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europris ASA and Orkla 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 Orkla ASA are associated (or correlated) with Europris ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europris ASA has no effect on the direction of Orkla ASA i.e., Orkla ASA and Europris ASA go up and down completely randomly.

Pair Corralation between Orkla ASA and Europris ASA

Assuming the 90 days trading horizon Orkla ASA is expected to generate 1.1 times less return on investment than Europris ASA. But when comparing it to its historical volatility, Orkla ASA is 1.11 times less risky than Europris ASA. It trades about 0.2 of its potential returns per unit of risk. Europris ASA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,270  in Europris ASA on December 30, 2024 and sell it today you would earn a total of  1,220  from holding Europris ASA or generate 16.78% return on investment over 90 days.

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

Orkla ASA  vs.  Europris ASA

Orkla ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Orkla ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Europris ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Europris ASA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Europris ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orkla ASA and Europris ASA

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

The idea behind Orkla ASA and Europris 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.