Correlation Between Gamma Communications and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and Solstad Offshore ASA, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Solstad Offshore.
Diversification Opportunities for Gamma Communications and Solstad Offshore
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Gamma and Solstad is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC 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 Gamma Communications 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 Gamma Communications PLC 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 Gamma Communications i.e., Gamma Communications and Solstad Offshore go up and down completely randomly.
Pair Corralation between Gamma Communications and Solstad Offshore
Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 0.73 times more return on investment than Solstad Offshore. However, Gamma Communications PLC is 1.36 times less risky than Solstad Offshore. It trades about 0.12 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about -0.2 per unit of risk. If you would invest 128,400 in Gamma Communications PLC on November 28, 2024 and sell it today you would earn a total of 4,200 from holding Gamma Communications PLC or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. Solstad Offshore ASA
Performance |
| Timeline |
| Gamma Communications PLC |
| Solstad Offshore ASA |
Gamma Communications and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Solstad Offshore
The main advantage of trading using opposite Gamma Communications and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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.| Gamma Communications vs. American Homes 4 | Gamma Communications vs. Allianz Technology Trust | Gamma Communications vs. Sartorius Stedim Biotech | Gamma Communications vs. Micron Technology |
| Solstad Offshore vs. Silvercorp Metals | Solstad Offshore vs. Wheaton Precious Metals | Solstad Offshore vs. AMG Advanced Metallurgical | Solstad Offshore vs. Norwegian Air Shuttle |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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