Correlation Between Aker ASA and Eidesvik Offshore

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

By analyzing existing cross correlation between Aker ASA and Eidesvik Offshore ASA, you can compare the effects of market volatilities on Aker ASA and Eidesvik Offshore 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 Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker ASA and Eidesvik Offshore.

Diversification Opportunities for Aker ASA and Eidesvik Offshore

0.86

Correlation Coefficient

Aker ASA  Eidesvik Offshore

Very poor diversification

The 3 months correlation between Aker and Eidesvik is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore 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 Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of Aker ASA i.e., Aker ASA and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between Aker ASA and Eidesvik Offshore

Assuming the 90 days trading horizon Aker ASA is expected to generate 4.83 times less return on investment than Eidesvik Offshore. But when comparing it to its historical volatility, Aker ASA is 1.41 times less risky than Eidesvik Offshore. It trades about 0.11 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  1,586  in Eidesvik Offshore ASA on March 2, 2024 and sell it today you would earn a total of  174.00  from holding Eidesvik Offshore ASA or generate 10.97% return on investment over 90 days.

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

Aker ASA  vs.  Eidesvik Offshore ASA

Aker ASA

Risk-Adjusted Performance

11 of 100

Good

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.

Eidesvik Offshore ASA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eidesvik Offshore ASA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Eidesvik Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aker ASA and Eidesvik Offshore

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

The idea behind Aker ASA and Eidesvik Offshore 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..