Correlation Between Odfjell Drilling and Lea Bank
Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling and Lea Bank 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 Lea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Odfjell Drilling and Lea Bank ASA, you can compare the effects of market volatilities on Odfjell Drilling and Lea Bank 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 Lea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and Lea Bank.
Diversification Opportunities for Odfjell Drilling and Lea Bank
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Odfjell and Lea is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank 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 Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Lea Bank go up and down completely randomly.
Pair Corralation between Odfjell Drilling and Lea Bank
Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.87 times more return on investment than Lea Bank. However, Odfjell Drilling is 1.15 times less risky than Lea Bank. It trades about 0.09 of its potential returns per unit of risk. Lea Bank ASA is currently generating about 0.03 per unit of risk. If you would invest 2,330 in Odfjell Drilling on August 25, 2024 and sell it today you would earn a total of 2,730 from holding Odfjell Drilling or generate 117.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Odfjell Drilling vs. Lea Bank ASA
Performance |
| Timeline |
| Odfjell Drilling |
| Lea Bank ASA |
Odfjell Drilling and Lea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Odfjell Drilling and Lea Bank
The main advantage of trading using opposite Odfjell Drilling and Lea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling position performs unexpectedly, Lea Bank 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 Lea Bank will offset losses from the drop in Lea Bank's long position.The idea behind Odfjell Drilling and Lea Bank 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.| Lea Bank vs. Arcticzymes Technologies ASA | Lea Bank vs. Nordic Mining ASA | Lea Bank vs. Morrow Bank ASA | Lea Bank vs. River Tech plc |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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