Correlation Between SpareBank and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both SpareBank and Odfjell Drilling 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 SpareBank and Odfjell Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SpareBank 1 stlandet and Odfjell Drilling, you can compare the effects of market volatilities on SpareBank and Odfjell Drilling 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 SpareBank with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of SpareBank and Odfjell Drilling.
Diversification Opportunities for SpareBank and Odfjell Drilling
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between SpareBank and Odfjell is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SpareBank 1 stlandet and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and SpareBank 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 SpareBank 1 stlandet are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of SpareBank i.e., SpareBank and Odfjell Drilling go up and down completely randomly.
Pair Corralation between SpareBank and Odfjell Drilling
Assuming the 90 days trading horizon SpareBank 1 stlandet is expected to generate 0.57 times more return on investment than Odfjell Drilling. However, SpareBank 1 stlandet is 1.76 times less risky than Odfjell Drilling. It trades about 0.07 of its potential returns per unit of risk. Odfjell Drilling is currently generating about -0.04 per unit of risk. If you would invest 13,572 in SpareBank 1 stlandet on September 1, 2024 and sell it today you would earn a total of 1,502 from holding SpareBank 1 stlandet or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SpareBank 1 stlandet vs. Odfjell Drilling
Performance |
| Timeline |
| SpareBank 1 stlandet |
| Odfjell Drilling |
SpareBank and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SpareBank and Odfjell Drilling
The main advantage of trading using opposite SpareBank and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SpareBank position performs unexpectedly, Odfjell Drilling 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 Odfjell Drilling will offset losses from the drop in Odfjell Drilling's long position.| SpareBank vs. Sparebank 1 SMN | SpareBank vs. Sparebank 1 Nord Norge | SpareBank vs. Sparebanken Vest | SpareBank vs. Sparebank 1 SR |
| Odfjell Drilling vs. Shelf Drilling | Odfjell Drilling vs. BW Offshore | Odfjell Drilling vs. Subsea 7 SA | Odfjell Drilling vs. Elkem 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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