Correlation Between Shelf Drilling and Aker Solutions

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

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

Diversification Opportunities for Shelf Drilling and Aker Solutions

0.32

Correlation Coefficient

Shelf Drilling  Aker Solutions

Weak diversification

The 3 months correlation between Shelf and Aker is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shelf Drilling and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA and Shelf Drilling 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 Shelf Drilling are associated (or correlated) with Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of Shelf Drilling i.e., Shelf Drilling and Aker Solutions go up and down completely randomly.

Pair Corralation between Shelf Drilling and Aker Solutions

Assuming the 90 days trading horizon Shelf Drilling is expected to generate 3.31 times less return on investment than Aker Solutions. In addition to that, Shelf Drilling is 1.34 times more volatile than Aker Solutions ASA. It trades about 0.01 of its total potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.05 per unit of volatility. If you would invest  2,028  in Aker Solutions ASA on September 13, 2024 and sell it today you would earn a total of  1,082  from holding Aker Solutions ASA or generate 53.35% return on investment over 90 days.

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

Shelf Drilling  vs.  Aker Solutions ASA

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aker Solutions ASA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker Solutions disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shelf Drilling and Aker Solutions

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

The idea behind Shelf Drilling and Aker Solutions 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.