Correlation Between Elkem ASA and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both Elkem ASA 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 Elkem ASA and Odfjell Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elkem ASA and Odfjell Drilling, you can compare the effects of market volatilities on Elkem ASA 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 Elkem ASA with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elkem ASA and Odfjell Drilling.
Diversification Opportunities for Elkem ASA and Odfjell Drilling
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Elkem and Odfjell is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Elkem ASA and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Elkem ASA 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 Elkem ASA 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 Elkem ASA i.e., Elkem ASA and Odfjell Drilling go up and down completely randomly.
Pair Corralation between Elkem ASA and Odfjell Drilling
Assuming the 90 days trading horizon Elkem ASA is expected to under-perform the Odfjell Drilling. In addition to that, Elkem ASA is 1.02 times more volatile than Odfjell Drilling. It trades about -0.01 of its total potential returns per unit of risk. Odfjell Drilling is currently generating about 0.01 per unit of volatility. If you would invest 4,929 in Odfjell Drilling on September 3, 2024 and sell it today you would lose (59.00) from holding Odfjell Drilling or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elkem ASA vs. Odfjell Drilling
Performance |
| Timeline |
| Elkem ASA |
| Odfjell Drilling |
Elkem ASA and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elkem ASA and Odfjell Drilling
The main advantage of trading using opposite Elkem ASA and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elkem ASA 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.| Elkem ASA vs. Storebrand ASA | Elkem ASA vs. Yara International ASA | Elkem ASA vs. Lery Seafood Group | Elkem ASA vs. DnB ASA |
| Odfjell Drilling vs. BW Offshore | Odfjell Drilling vs. Subsea 7 SA | Odfjell Drilling vs. Elkem ASA | Odfjell Drilling vs. Integrated Wind Solutions |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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