Correlation Between Subsea 7 and Storebrand ASA

Can any of the company-specific risk be diversified away by investing in both Subsea 7 and Storebrand 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 Subsea 7 and Storebrand ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Subsea 7 SA and Storebrand ASA, you can compare the effects of market volatilities on Subsea 7 and Storebrand 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 Subsea 7 with a short position of Storebrand ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Storebrand ASA.

Diversification Opportunities for Subsea 7 and Storebrand ASA

-0.38

Correlation Coefficient

Subsea 7  Storebrand ASA

Very good diversification

The 3 months correlation between Subsea and Storebrand is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA and Subsea 7 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 Subsea 7 SA are associated (or correlated) with Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of Subsea 7 i.e., Subsea 7 and Storebrand ASA go up and down completely randomly.

Pair Corralation between Subsea 7 and Storebrand ASA

Assuming the 90 days trading horizon Subsea 7 SA is expected to under-perform the Storebrand ASA. In addition to that, Subsea 7 is 1.64 times more volatile than Storebrand ASA. It trades about -0.02 of its total potential returns per unit of risk. Storebrand ASA is currently generating about 0.08 per unit of volatility. If you would invest  11,520  in Storebrand ASA on August 31, 2024 and sell it today you would earn a total of  690.00  from holding Storebrand ASA or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Subsea 7 SA  vs.  Storebrand ASA

Subsea 7 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Subsea 7 is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Storebrand ASA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand ASA are ranked lower than 6 (%) 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.

Pair Trading with Subsea 7 and Storebrand ASA

The main advantage of trading using opposite Subsea 7 and Storebrand ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 position performs unexpectedly, Storebrand 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 Storebrand ASA will offset losses from the drop in Storebrand ASA's long position.

The idea behind Subsea 7 SA and Storebrand 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.