Correlation Between Deep Value and Northern Ocean
Can any of the company-specific risk be diversified away by investing in both Deep Value and Northern Ocean 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 Deep Value and Northern Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deep Value Driller and Northern Ocean, you can compare the effects of market volatilities on Deep Value and Northern Ocean 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 Deep Value with a short position of Northern Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deep Value and Northern Ocean.
Diversification Opportunities for Deep Value and Northern Ocean
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Deep and Northern is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Northern Ocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Ocean and Deep Value 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 Deep Value Driller are associated (or correlated) with Northern Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Ocean has no effect on the direction of Deep Value i.e., Deep Value and Northern Ocean go up and down completely randomly.
Pair Corralation between Deep Value and Northern Ocean
Assuming the 90 days trading horizon Deep Value Driller is expected to under-perform the Northern Ocean. But the stock apears to be less risky and, when comparing its historical volatility, Deep Value Driller is 2.06 times less risky than Northern Ocean. The stock trades about -0.44 of its potential returns per unit of risk. The Northern Ocean is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 774.00 in Northern Ocean on August 29, 2024 and sell it today you would earn a total of 64.00 from holding Northern Ocean or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Deep Value Driller vs. Northern Ocean
Performance |
| Timeline |
| Deep Value Driller |
| Northern Ocean |
Deep Value and Northern Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deep Value and Northern Ocean
The main advantage of trading using opposite Deep Value and Northern Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deep Value position performs unexpectedly, Northern Ocean 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 Northern Ocean will offset losses from the drop in Northern Ocean's long position.| Deep Value vs. Romerike Sparebank | Deep Value vs. Norwegian Air Shuttle | Deep Value vs. Clean Seas Seafood | Deep Value vs. Proximar Seafood AS |
| Northern Ocean vs. Odfjell Drilling | Northern Ocean vs. Shelf Drilling | Northern Ocean vs. Deep Value Driller | Northern Ocean vs. Borr Drilling |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Stocks Directory Find actively traded stocks across global markets |