Correlation Between Raytheon Technologies and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies and Odfjell Drilling 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 Raytheon Technologies and Odfjell Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies Corp and Odfjell Drilling, you can compare the effects of market volatilities on Raytheon Technologies and Odfjell Drilling 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 Raytheon Technologies with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Odfjell Drilling.
Diversification Opportunities for Raytheon Technologies and Odfjell Drilling
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Raytheon and Odfjell is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Raytheon Technologies 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 Raytheon Technologies Corp are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Odfjell Drilling go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Odfjell Drilling
Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 4.16 times less return on investment than Odfjell Drilling. But when comparing it to its historical volatility, Raytheon Technologies Corp is 2.31 times less risky than Odfjell Drilling. It trades about 0.13 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 5,040 in Odfjell Drilling on October 26, 2024 and sell it today you would earn a total of 1,160 from holding Odfjell Drilling or generate 23.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Raytheon Technologies Corp vs. Odfjell Drilling
Performance |
| Timeline |
| Raytheon Technologies |
| Odfjell Drilling |
Raytheon Technologies and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Odfjell Drilling
The main advantage of trading using opposite Raytheon Technologies and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies position performs unexpectedly, Odfjell Drilling 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 Odfjell Drilling will offset losses from the drop in Odfjell Drilling's long position.| Raytheon Technologies vs. Cairo Communication SpA | Raytheon Technologies vs. Verizon Communications | Raytheon Technologies vs. Aeorema Communications Plc | Raytheon Technologies vs. Arrow Electronics |
| Odfjell Drilling vs. Berkshire Hathaway | Odfjell Drilling vs. Samsung Electronics Co | Odfjell Drilling vs. Samsung Electronics Co | Odfjell Drilling vs. Chocoladefabriken Lindt Spruengli |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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