Correlation Between Reach Subsea and DnB ASA
Can any of the company-specific risk be diversified away by investing in both Reach Subsea and DnB ASA 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 Reach Subsea and DnB ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reach Subsea and DnB ASA, you can compare the effects of market volatilities on Reach Subsea and DnB ASA 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 Reach Subsea with a short position of DnB ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reach Subsea and DnB ASA.
Diversification Opportunities for Reach Subsea and DnB ASA
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reach and DnB is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Reach Subsea and DnB ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DnB ASA and Reach Subsea 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 Reach Subsea are associated (or correlated) with DnB ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DnB ASA has no effect on the direction of Reach Subsea i.e., Reach Subsea and DnB ASA go up and down completely randomly.
Pair Corralation between Reach Subsea and DnB ASA
Assuming the 90 days trading horizon Reach Subsea is expected to under-perform the DnB ASA. In addition to that, Reach Subsea is 2.59 times more volatile than DnB ASA. It trades about -0.17 of its total potential returns per unit of risk. DnB ASA is currently generating about 0.26 per unit of volatility. If you would invest 24,430 in DnB ASA on November 29, 2024 and sell it today you would earn a total of 1,440 from holding DnB ASA or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Reach Subsea vs. DnB ASA
Performance |
| Timeline |
| Reach Subsea |
| DnB ASA |
Reach Subsea and DnB ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reach Subsea and DnB ASA
The main advantage of trading using opposite Reach Subsea and DnB ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reach Subsea position performs unexpectedly, DnB ASA 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 DnB ASA will offset losses from the drop in DnB ASA's long position.| Reach Subsea vs. BW Offshore | Reach Subsea vs. Eidesvik Offshore ASA | Reach Subsea vs. Solstad Offsho | Reach Subsea vs. Odfjell Drilling |
| DnB ASA vs. Telenor ASA | DnB ASA vs. Storebrand ASA | DnB ASA vs. Orkla ASA | DnB ASA vs. Gjensidige Forsikring 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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