Correlation Between Odfjell Drilling and Sparebank
Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling and Sparebank 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 Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Odfjell Drilling and Sparebank 1 SMN, you can compare the effects of market volatilities on Odfjell Drilling and Sparebank 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 Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and Sparebank.
Diversification Opportunities for Odfjell Drilling and Sparebank
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Odfjell and Sparebank is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Sparebank 1 SMN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SMN 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 Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SMN has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Sparebank go up and down completely randomly.
Pair Corralation between Odfjell Drilling and Sparebank
Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 1.54 times more return on investment than Sparebank. However, Odfjell Drilling is 1.54 times more volatile than Sparebank 1 SMN. It trades about 0.05 of its potential returns per unit of risk. Sparebank 1 SMN is currently generating about -0.03 per unit of risk. If you would invest 4,917 in Odfjell Drilling on August 29, 2024 and sell it today you would earn a total of 78.00 from holding Odfjell Drilling or generate 1.59% 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. Sparebank 1 SMN
Performance |
| Timeline |
| Odfjell Drilling |
| Sparebank 1 SMN |
Odfjell Drilling and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Odfjell Drilling and Sparebank
The main advantage of trading using opposite Odfjell Drilling and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.The idea behind Odfjell Drilling and Sparebank 1 SMN 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.| Sparebank vs. Sparebank 1 Nord Norge | Sparebank vs. Sparebanken Vest | Sparebank vs. Storebrand ASA | Sparebank vs. DnB ASA |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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