Correlation Between Orkla ASA and Storebrand ASA

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

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

Diversification Opportunities for Orkla ASA and Storebrand ASA

0.76

Correlation Coefficient

Orkla ASA  Storebrand ASA

Poor diversification

The 3 months correlation between Orkla and Storebrand is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA and Orkla 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 Orkla ASA 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 Orkla ASA i.e., Orkla ASA and Storebrand ASA go up and down completely randomly.

Pair Corralation between Orkla ASA and Storebrand ASA

Assuming the 90 days trading horizon Orkla ASA is expected to generate 1.17 times less return on investment than Storebrand ASA. In addition to that, Orkla ASA is 1.6 times more volatile than Storebrand ASA. It trades about 0.27 of its total potential returns per unit of risk. Storebrand ASA is currently generating about 0.5 per unit of volatility. If you would invest  9,350  in Storebrand ASA on February 11, 2024 and sell it today you would earn a total of  1,760  from holding Storebrand ASA or generate 18.82% return on investment over 90 days.

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

Orkla ASA  vs.  Storebrand ASA

Orkla ASA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA are ranked lower than 13 (%) 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.

Storebrand ASA

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand ASA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Storebrand ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orkla ASA and Storebrand ASA

The main advantage of trading using opposite Orkla ASA and Storebrand ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA 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 Orkla ASA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.