Correlation Between European Metals and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both European Metals 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 European Metals and Odfjell Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Odfjell Drilling, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Odfjell Drilling.
Diversification Opportunities for European Metals and Odfjell Drilling
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between European and Odfjell is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Odfjell Drilling go up and down completely randomly.
Pair Corralation between European Metals and Odfjell Drilling
Assuming the 90 days trading horizon European Metals is expected to generate 1.08 times less return on investment than Odfjell Drilling. In addition to that, European Metals is 1.58 times more volatile than Odfjell Drilling. It trades about 0.2 of its total potential returns per unit of risk. Odfjell Drilling is currently generating about 0.34 per unit of volatility. If you would invest 5,054 in Odfjell Drilling on October 11, 2024 and sell it today you would earn a total of 806.00 from holding Odfjell Drilling or generate 15.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Odfjell Drilling
Performance |
| Timeline |
| European Metals Holdings |
| Odfjell Drilling |
European Metals and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Odfjell Drilling
The main advantage of trading using opposite European Metals and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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.| European Metals vs. Charter Communications Cl | European Metals vs. Batm Advanced Communications | European Metals vs. Darden Restaurants | European Metals vs. Molson Coors Beverage |
| Odfjell Drilling vs. Host Hotels Resorts | Odfjell Drilling vs. European Metals Holdings | Odfjell Drilling vs. Veolia Environnement VE | Odfjell Drilling vs. Rheinmetall AG |
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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