Correlation Between Solstad Offsho and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Solstad Offsho and Equinor 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 Solstad Offsho and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solstad Offsho and Equinor ASA, you can compare the effects of market volatilities on Solstad Offsho and Equinor 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 Solstad Offsho with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offsho and Equinor ASA.
Diversification Opportunities for Solstad Offsho and Equinor ASA
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solstad and Equinor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offsho and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Solstad Offsho 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 Solstad Offsho are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Solstad Offsho i.e., Solstad Offsho and Equinor ASA go up and down completely randomly.
Pair Corralation between Solstad Offsho and Equinor ASA
Assuming the 90 days trading horizon Solstad Offsho is expected to generate 2.08 times more return on investment than Equinor ASA. However, Solstad Offsho is 2.08 times more volatile than Equinor ASA. It trades about 0.3 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.04 per unit of risk. If you would invest 2,988 in Solstad Offsho on August 25, 2024 and sell it today you would earn a total of 1,012 from holding Solstad Offsho or generate 33.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solstad Offsho vs. Equinor ASA
Performance |
| Timeline |
| Solstad Offsho |
| Equinor ASA |
Solstad Offsho and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solstad Offsho and Equinor ASA
The main advantage of trading using opposite Solstad Offsho and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offsho position performs unexpectedly, Equinor 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.| Solstad Offsho vs. Havila Shipping ASA | Solstad Offsho vs. Prosafe SE | Solstad Offsho vs. Eidesvik Offshore ASA |
| Equinor ASA vs. DnB ASA | Equinor ASA vs. Mowi ASA | Equinor ASA vs. Yara International ASA | Equinor ASA vs. Telenor 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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