Correlation Between Willamette Valley and Aker BP

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

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

Diversification Opportunities for Willamette Valley and Aker BP

0.16

Correlation Coefficient

Willamette Valley  Aker BP

Average diversification

The 3 months correlation between Willamette and Aker is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards 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 Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Aker BP go up and down completely randomly.

Pair Corralation between Willamette Valley and Aker BP

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Aker BP. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.8 times less risky than Aker BP. The stock trades about -0.05 of its potential returns per unit of risk. The Aker BP ASA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Aker BP ASA on October 2, 2024 and sell it today you would lose (315.00) from holding Aker BP ASA or give up 25.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.98%
Values	Daily Returns

Willamette Valley Vineyards  vs.  Aker BP ASA

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Willamette Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Aker BP ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Aker BP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Willamette Valley and Aker BP

The main advantage of trading using opposite Willamette Valley and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.