Correlation Between Northern Ocean and Deep Value
Can any of the company-specific risk be diversified away by investing in both Northern Ocean and Deep Value 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 Northern Ocean and Deep Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Ocean and Deep Value Driller, you can compare the effects of market volatilities on Northern Ocean and Deep Value 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 Northern Ocean with a short position of Deep Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Ocean and Deep Value.
Diversification Opportunities for Northern Ocean and Deep Value
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and Deep is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Northern Ocean and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller and Northern Ocean 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 Northern Ocean are associated (or correlated) with Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Northern Ocean i.e., Northern Ocean and Deep Value go up and down completely randomly.
Pair Corralation between Northern Ocean and Deep Value
Assuming the 90 days trading horizon Northern Ocean is expected to generate 2.06 times more return on investment than Deep Value. However, Northern Ocean is 2.06 times more volatile than Deep Value Driller. It trades about 0.11 of its potential returns per unit of risk. Deep Value Driller is currently generating about -0.44 per unit of risk. If you would invest 774.00 in Northern Ocean on August 29, 2024 and sell it today you would earn a total of 64.00 from holding Northern Ocean or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Northern Ocean vs. Deep Value Driller
Performance |
| Timeline |
| Northern Ocean |
| Deep Value Driller |
Northern Ocean and Deep Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Ocean and Deep Value
The main advantage of trading using opposite Northern Ocean and Deep Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Ocean position performs unexpectedly, Deep Value 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 Deep Value will offset losses from the drop in Deep Value's long position.| Northern Ocean vs. Odfjell Drilling | Northern Ocean vs. Shelf Drilling | Northern Ocean vs. Deep Value Driller | Northern Ocean vs. Borr Drilling |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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