Correlation Between Aker BP and Zenith Energy

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

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

Diversification Opportunities for Aker BP and Zenith Energy

0.57

Correlation Coefficient

Aker BP  Zenith Energy

Very weak diversification

The 3 months correlation between Aker and Zenith is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Zenith Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zenith Energy and Aker BP 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 BP ASA are associated (or correlated) with Zenith Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zenith Energy has no effect on the direction of Aker BP i.e., Aker BP and Zenith Energy go up and down completely randomly.

Pair Corralation between Aker BP and Zenith Energy

Assuming the 90 days trading horizon Aker BP ASA is expected to generate 0.16 times more return on investment than Zenith Energy. However, Aker BP ASA is 6.25 times less risky than Zenith Energy. It trades about 0.15 of its potential returns per unit of risk. Zenith Energy is currently generating about 0.0 per unit of risk. If you would invest  21,055  in Aker BP ASA on April 25, 2025 and sell it today you would earn a total of  3,585  from holding Aker BP ASA or generate 17.03% return on investment over 90 days.

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

Aker BP ASA  vs.  Zenith Energy

Aker BP ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Aker BP displayed solid returns over the last few months and may actually be approaching a breakup point.

Zenith Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zenith Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Zenith Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aker BP and Zenith Energy

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

The idea behind Aker BP ASA and Zenith Energy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.