Correlation Between Eidesvik Offshore and Pearson Plc
Can any of the company-specific risk be diversified away by investing in both Eidesvik Offshore and Pearson Plc 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 Pearson Plc 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 Pearson plc, you can compare the effects of market volatilities on Eidesvik Offshore and Pearson Plc 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 Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eidesvik Offshore and Pearson Plc.
Diversification Opportunities for Eidesvik Offshore and Pearson Plc
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eidesvik and Pearson is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc 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 Pearson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson plc has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Pearson Plc go up and down completely randomly.
Pair Corralation between Eidesvik Offshore and Pearson Plc
Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 3.19 times more return on investment than Pearson Plc. However, Eidesvik Offshore is 3.19 times more volatile than Pearson plc. It trades about 0.13 of its potential returns per unit of risk. Pearson plc is currently generating about 0.05 per unit of risk. If you would invest 111.00 in Eidesvik Offshore ASA on October 15, 2024 and sell it today you would earn a total of 6.00 from holding Eidesvik Offshore ASA or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eidesvik Offshore ASA vs. Pearson plc
Performance |
| Timeline |
| Eidesvik Offshore ASA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Pearson plc |
Eidesvik Offshore and Pearson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eidesvik Offshore and Pearson Plc
The main advantage of trading using opposite Eidesvik Offshore and Pearson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore position performs unexpectedly, Pearson Plc 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 Pearson Plc will offset losses from the drop in Pearson Plc's long position.| Eidesvik Offshore vs. Mitsubishi Materials | Eidesvik Offshore vs. Vulcan Materials | Eidesvik Offshore vs. ANGANG STEEL H | Eidesvik Offshore vs. NEWELL RUBBERMAID |
| Pearson Plc vs. SEALED AIR | Pearson Plc vs. Pentair plc | Pearson Plc vs. Eidesvik Offshore ASA | Pearson Plc vs. Performance Food Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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