Correlation Between Telenor ASA and Storebrand ASA

Can any of the company-specific risk be diversified away by investing in both Telenor 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 Telenor 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 Telenor ASA and Storebrand ASA, you can compare the effects of market volatilities on Telenor 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 Telenor ASA with a short position of Storebrand ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and Storebrand ASA.

Diversification Opportunities for Telenor ASA and Storebrand ASA

0.76

Correlation Coefficient

Telenor ASA  Storebrand ASA

Poor diversification

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

Pair Corralation between Telenor ASA and Storebrand ASA

Assuming the 90 days trading horizon Telenor ASA is expected to generate 2.9 times less return on investment than Storebrand ASA. But when comparing it to its historical volatility, Telenor ASA is 1.84 times less risky than Storebrand ASA. It trades about 0.16 of its potential returns per unit of risk. Storebrand ASA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,508  in Storebrand ASA on February 2, 2024 and sell it today you would earn a total of  1,182  from holding Storebrand ASA or generate 12.43% return on investment over 90 days.

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

Telenor ASA  vs.  Storebrand ASA

Telenor ASA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Telenor ASA may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Storebrand ASA

Risk-Adjusted Performance

13 of 100

Good

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

The main advantage of trading using opposite Telenor ASA and Storebrand ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor 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 Telenor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.