Correlation Between Odfjell Drilling and Northern Ocean
Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling and Northern Ocean 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 Northern Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Odfjell Drilling and Northern Ocean, you can compare the effects of market volatilities on Odfjell Drilling and Northern Ocean 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 Northern Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and Northern Ocean.
Diversification Opportunities for Odfjell Drilling and Northern Ocean
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Odfjell and Northern is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Northern Ocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Ocean 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 Northern Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Ocean has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Northern Ocean go up and down completely randomly.
Pair Corralation between Odfjell Drilling and Northern Ocean
Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.92 times more return on investment than Northern Ocean. However, Odfjell Drilling is 1.08 times less risky than Northern Ocean. It trades about 0.34 of its potential returns per unit of risk. Northern Ocean is currently generating about -0.06 per unit of risk. If you would invest 5,510 in Odfjell Drilling on November 3, 2024 and sell it today you would earn a total of 710.00 from holding Odfjell Drilling or generate 12.89% 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. Northern Ocean
Performance |
| Timeline |
| Odfjell Drilling |
| Northern Ocean |
Odfjell Drilling and Northern Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Odfjell Drilling and Northern Ocean
The main advantage of trading using opposite Odfjell Drilling and Northern Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling position performs unexpectedly, Northern Ocean 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 Northern Ocean will offset losses from the drop in Northern Ocean's long position.The idea behind Odfjell Drilling and Northern Ocean 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.| Northern Ocean vs. Odfjell Drilling | Northern Ocean vs. Shelf Drilling | Northern Ocean vs. Deep Value Driller |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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