Correlation Between Shelf Drilling and Cool Company
Can any of the company-specific risk be diversified away by investing in both Shelf Drilling and Cool Company 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 Shelf Drilling and Cool Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shelf Drilling and Cool Company Oy, you can compare the effects of market volatilities on Shelf Drilling and Cool Company 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 Shelf Drilling with a short position of Cool Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shelf Drilling and Cool Company.
Diversification Opportunities for Shelf Drilling and Cool Company
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shelf and Cool is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shelf Drilling and Cool Company Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company Oy and Shelf 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 Shelf Drilling are associated (or correlated) with Cool Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company Oy has no effect on the direction of Shelf Drilling i.e., Shelf Drilling and Cool Company go up and down completely randomly.
Pair Corralation between Shelf Drilling and Cool Company
Assuming the 90 days trading horizon Shelf Drilling is expected to under-perform the Cool Company. In addition to that, Shelf Drilling is 1.95 times more volatile than Cool Company Oy. It trades about -0.13 of its total potential returns per unit of risk. Cool Company Oy is currently generating about -0.14 per unit of volatility. If you would invest 11,750 in Cool Company Oy on September 3, 2024 and sell it today you would lose (2,550) from holding Cool Company Oy or give up 21.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shelf Drilling vs. Cool Company Oy
Performance |
| Timeline |
| Shelf Drilling |
| Cool Company Oy |
Shelf Drilling and Cool Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shelf Drilling and Cool Company
The main advantage of trading using opposite Shelf Drilling and Cool Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shelf Drilling position performs unexpectedly, Cool Company 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 Cool Company will offset losses from the drop in Cool Company's long position.| Shelf Drilling vs. BW Offshore | Shelf Drilling vs. Subsea 7 SA | Shelf Drilling vs. Elkem ASA | Shelf Drilling vs. Integrated Wind Solutions |
| Cool Company vs. Nordic Technology Group | Cool Company vs. Beerenberg AS | Cool Company vs. Shelf Drilling | Cool Company vs. Helgeland Sparebank |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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