Correlation Between Storebrand ASA and TGS NOPEC

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

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

Diversification Opportunities for Storebrand ASA and TGS NOPEC

0.24

Correlation Coefficient

Storebrand ASA  TGS NOPEC

Modest diversification

The 3 months correlation between Storebrand and TGS is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Storebrand ASA and TGS NOPEC Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGS NOPEC Geophysical and Storebrand 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 Storebrand ASA are associated (or correlated) with TGS NOPEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGS NOPEC Geophysical has no effect on the direction of Storebrand ASA i.e., Storebrand ASA and TGS NOPEC go up and down completely randomly.

Pair Corralation between Storebrand ASA and TGS NOPEC

Assuming the 90 days trading horizon Storebrand ASA is expected to generate 5.54 times less return on investment than TGS NOPEC. But when comparing it to its historical volatility, Storebrand ASA is 1.02 times less risky than TGS NOPEC. It trades about 0.02 of its potential returns per unit of risk. TGS NOPEC Geophysical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10,390  in TGS NOPEC Geophysical on November 19, 2024 and sell it today you would earn a total of  1,110  from holding TGS NOPEC Geophysical or generate 10.68% return on investment over 90 days.

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

Storebrand ASA  vs.  TGS NOPEC Geophysical

Storebrand ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Storebrand ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TGS NOPEC Geophysical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TGS NOPEC Geophysical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TGS NOPEC may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Storebrand ASA and TGS NOPEC

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

The idea behind Storebrand ASA and TGS NOPEC Geophysical 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.