Correlation Between Eidesvik Offshore and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Eidesvik Offshore and Sims Metal 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 Eidesvik Offshore and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eidesvik Offshore ASA and Sims Metal Management, you can compare the effects of market volatilities on Eidesvik Offshore and Sims Metal 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 Eidesvik Offshore with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eidesvik Offshore and Sims Metal.
Diversification Opportunities for Eidesvik Offshore and Sims Metal
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eidesvik and Sims is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management and Eidesvik Offshore 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 Eidesvik Offshore ASA are associated (or correlated) with Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Sims Metal go up and down completely randomly.
Pair Corralation between Eidesvik Offshore and Sims Metal
Assuming the 90 days trading horizon Eidesvik Offshore is expected to generate 4.64 times less return on investment than Sims Metal. But when comparing it to its historical volatility, Eidesvik Offshore ASA is 1.67 times less risky than Sims Metal. It trades about 0.04 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 765.00 in Sims Metal Management on September 4, 2024 and sell it today you would earn a total of 35.00 from holding Sims Metal Management or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Eidesvik Offshore ASA vs. Sims Metal Management
Performance |
| Timeline |
| Eidesvik Offshore ASA |
| Sims Metal Management |
Eidesvik Offshore and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eidesvik Offshore and Sims Metal
The main advantage of trading using opposite Eidesvik Offshore and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Eidesvik Offshore vs. Halliburton | Eidesvik Offshore vs. Superior Plus Corp | Eidesvik Offshore vs. NMI Holdings | Eidesvik Offshore vs. Origin Agritech |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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