Correlation Between Eidesvik Offshore and United Utilities
Can any of the company-specific risk be diversified away by investing in both Eidesvik Offshore and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Eidesvik Offshore and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eidesvik Offshore and United Utilities.
Diversification Opportunities for Eidesvik Offshore and United Utilities
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eidesvik and United is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and United Utilities go up and down completely randomly.
Pair Corralation between Eidesvik Offshore and United Utilities
Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to under-perform the United Utilities. In addition to that, Eidesvik Offshore is 1.35 times more volatile than United Utilities Group. It trades about -0.18 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.11 per unit of volatility. If you would invest 1,260 in United Utilities Group on August 30, 2024 and sell it today you would earn a total of 90.00 from holding United Utilities Group or generate 7.14% 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. United Utilities Group
Performance |
| Timeline |
| Eidesvik Offshore ASA |
| United Utilities |
Eidesvik Offshore and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eidesvik Offshore and United Utilities
The main advantage of trading using opposite Eidesvik Offshore and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Eidesvik Offshore vs. NOV Inc | Eidesvik Offshore vs. Superior Plus Corp | Eidesvik Offshore vs. NMI Holdings | Eidesvik Offshore vs. SIVERS SEMICONDUCTORS AB |
| United Utilities vs. Guangdong Investment Limited | United Utilities vs. TTW Public | United Utilities vs. Superior Plus Corp | United Utilities vs. SIVERS SEMICONDUCTORS AB |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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