Correlation Between Santos and Aker BP

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

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

Diversification Opportunities for Santos and Aker BP

0.0

Correlation Coefficient

Santos  Aker BP

Pay attention - limited upside

The 3 months correlation between Santos and Aker is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Santos Ltd ADR and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA and Santos 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 Santos Ltd ADR are associated (or correlated) with Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Santos i.e., Santos and Aker BP go up and down completely randomly.

Pair Corralation between Santos and Aker BP

If you would invest  967.00  in Aker BP ASA on December 27, 2024 and sell it today you would earn a total of  233.00  from holding Aker BP ASA or generate 24.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Santos Ltd ADR  vs.  Aker BP ASA

Santos Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Santos Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Santos is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aker BP ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Aker BP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Santos and Aker BP

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

The idea behind Santos Ltd ADR and Aker BP 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.