Correlation Between Scatec Solar and Aker Carbon

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

By analyzing existing cross correlation between Scatec Solar OL and Aker Carbon Capture, you can compare the effects of market volatilities on Scatec Solar and Aker Carbon 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 Scatec Solar with a short position of Aker Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scatec Solar and Aker Carbon.

Diversification Opportunities for Scatec Solar and Aker Carbon

0.34

Correlation Coefficient

Scatec Solar  Aker Carbon

Weak diversification

The 3 months correlation between Scatec and Aker is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Scatec Solar OL and Aker Carbon Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Carbon Capture and Scatec Solar 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 Scatec Solar OL are associated (or correlated) with Aker Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Carbon Capture has no effect on the direction of Scatec Solar i.e., Scatec Solar and Aker Carbon go up and down completely randomly.

Pair Corralation between Scatec Solar and Aker Carbon

Assuming the 90 days trading horizon Scatec Solar OL is expected to generate 0.71 times more return on investment than Aker Carbon. However, Scatec Solar OL is 1.41 times less risky than Aker Carbon. It trades about 0.01 of its potential returns per unit of risk. Aker Carbon Capture is currently generating about -0.07 per unit of risk. If you would invest  8,045  in Scatec Solar OL on September 16, 2024 and sell it today you would lose (120.00) from holding Scatec Solar OL or give up 1.49% of portfolio value over 90 days.

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

Scatec Solar OL  vs.  Aker Carbon Capture

Scatec Solar OL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scatec Solar OL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Scatec Solar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Aker Carbon Capture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aker Carbon Capture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Aker Carbon is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Scatec Solar and Aker Carbon

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

The idea behind Scatec Solar OL and Aker Carbon Capture 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.