Correlation Between Odfjell Drilling and Eidesvik Offshore
Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling and Eidesvik 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 Odfjell Drilling and Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Odfjell Drilling and Eidesvik Offshore ASA, you can compare the effects of market volatilities on Odfjell Drilling and Eidesvik 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 Odfjell Drilling with a short position of Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and Eidesvik Offshore.
Diversification Opportunities for Odfjell Drilling and Eidesvik Offshore
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Odfjell and Eidesvik is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA and Odfjell Drilling 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 Odfjell Drilling are associated (or correlated) with Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Eidesvik Offshore go up and down completely randomly.
Pair Corralation between Odfjell Drilling and Eidesvik Offshore
Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.77 times more return on investment than Eidesvik Offshore. However, Odfjell Drilling is 1.3 times less risky than Eidesvik Offshore. It trades about 0.09 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.01 per unit of risk. If you would invest 4,917 in Odfjell Drilling on August 28, 2024 and sell it today you would earn a total of 143.00 from holding Odfjell Drilling or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Odfjell Drilling vs. Eidesvik Offshore ASA
Performance |
| Timeline |
| Odfjell Drilling |
| Eidesvik Offshore ASA |
Odfjell Drilling and Eidesvik Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Odfjell Drilling and Eidesvik Offshore
The main advantage of trading using opposite Odfjell Drilling and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling position performs unexpectedly, Eidesvik 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 Eidesvik Offshore will offset losses from the drop in Eidesvik Offshore's long position.The idea behind Odfjell Drilling and Eidesvik 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.| Eidesvik Offshore vs. Solstad Offsho | Eidesvik Offshore vs. Havila Shipping ASA | Eidesvik Offshore vs. Prosafe SE | Eidesvik Offshore vs. BW Offshore |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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