Correlation Between Europa Metals and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both Europa Metals and Solstad Offshore 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 Europa Metals and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europa Metals and Solstad Offshore ASA, you can compare the effects of market volatilities on Europa Metals and Solstad Offshore 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 Europa Metals with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and Solstad Offshore.
Diversification Opportunities for Europa Metals and Solstad Offshore
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Europa and Solstad is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Europa 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 Europa Metals are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Europa Metals i.e., Europa Metals and Solstad Offshore go up and down completely randomly.
Pair Corralation between Europa Metals and Solstad Offshore
Assuming the 90 days trading horizon Europa Metals is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Europa Metals is 1.11 times less risky than Solstad Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,056 in Solstad Offshore ASA on August 29, 2024 and sell it today you would earn a total of 2,244 from holding Solstad Offshore ASA or generate 109.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.37% |
| Values | Daily Returns |
Europa Metals vs. Solstad Offshore ASA
Performance |
| Timeline |
| Europa Metals |
| Solstad Offshore ASA |
Europa Metals and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europa Metals and Solstad Offshore
The main advantage of trading using opposite Europa Metals and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europa Metals position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.The idea behind Europa Metals and Solstad Offshore ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Solstad Offshore vs. Lendinvest PLC | Solstad Offshore vs. Neometals | Solstad Offshore vs. Albion Technology General | Solstad Offshore vs. Jupiter Fund Management |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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