Correlation Between Yara International and Orkla ASA

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

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

Diversification Opportunities for Yara International and Orkla ASA

0.33

Correlation Coefficient

Yara International  Orkla ASA

Weak diversification

The 3 months correlation between Yara and Orkla is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Orkla ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orkla ASA and Yara International 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 Yara International ASA are associated (or correlated) with Orkla ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orkla ASA has no effect on the direction of Yara International i.e., Yara International and Orkla ASA go up and down completely randomly.

Pair Corralation between Yara International and Orkla ASA

Assuming the 90 days trading horizon Yara International is expected to generate 2.78 times less return on investment than Orkla ASA. In addition to that, Yara International is 1.47 times more volatile than Orkla ASA. It trades about 0.05 of its total potential returns per unit of risk. Orkla ASA is currently generating about 0.2 per unit of volatility. If you would invest  9,835  in Orkla ASA on December 29, 2024 and sell it today you would earn a total of  1,495  from holding Orkla ASA or generate 15.2% return on investment over 90 days.

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

Yara International ASA  vs.  Orkla ASA

Yara International ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Yara International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Orkla ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Orkla ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yara International and Orkla ASA

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

The idea behind Yara International ASA and Orkla 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .