Can any of the company-specific risk be diversified away by investing in both Aker ASA and Akastor 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 Aker ASA and Akastor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker ASA and Akastor ASA, you can compare the effects of market volatilities on Aker ASA and Akastor 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 Aker ASA with a short position of Akastor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker ASA and Akastor ASA.
Diversification Opportunities for Aker ASA and Akastor ASA
The 3 months correlation between Aker and Akastor is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Akastor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akastor ASA and Aker 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 Aker ASA are associated (or correlated) with Akastor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akastor ASA has no effect on the direction of Aker ASA i.e., Aker ASA and Akastor ASA go up and down completely randomly.
Assuming the 90 days trading horizon Aker ASA is expected to generate 15.59 times less return on investment than Akastor ASA. But when comparing it to its historical volatility, Aker ASA is 1.87 times less risky than Akastor ASA. It trades about 0.03 of its potential returns per unit of risk. Akastor ASA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,360 in Akastor ASA on March 6, 2024 and sell it today you would earn a total of 120.00 from holding Akastor ASA or generate 8.82% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Aker ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Aker ASA may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in Akastor ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Akastor ASA displayed solid returns over the last few months and may actually be approaching a breakup point.