Correlation Between Subsea 7 and Edda Wind
Can any of the company-specific risk be diversified away by investing in both Subsea 7 and Edda Wind 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 Subsea 7 and Edda Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Subsea 7 SA and Edda Wind ASA, you can compare the effects of market volatilities on Subsea 7 and Edda Wind 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 Subsea 7 with a short position of Edda Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Edda Wind.
Diversification Opportunities for Subsea 7 and Edda Wind
Very good diversification
The 3 months correlation between Subsea and Edda is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Edda Wind ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edda Wind ASA and Subsea 7 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 Subsea 7 SA are associated (or correlated) with Edda Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edda Wind ASA has no effect on the direction of Subsea 7 i.e., Subsea 7 and Edda Wind go up and down completely randomly.
Pair Corralation between Subsea 7 and Edda Wind
Assuming the 90 days trading horizon Subsea 7 SA is expected to generate 0.92 times more return on investment than Edda Wind. However, Subsea 7 SA is 1.08 times less risky than Edda Wind. It trades about 0.06 of its potential returns per unit of risk. Edda Wind ASA is currently generating about -0.03 per unit of risk. If you would invest 12,280 in Subsea 7 SA on November 2, 2024 and sell it today you would earn a total of 6,470 from holding Subsea 7 SA or generate 52.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Subsea 7 SA vs. Edda Wind ASA
Performance |
| Timeline |
| Subsea 7 SA |
| Edda Wind ASA |
Subsea 7 and Edda Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Subsea 7 and Edda Wind
The main advantage of trading using opposite Subsea 7 and Edda Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 position performs unexpectedly, Edda Wind 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 Edda Wind will offset losses from the drop in Edda Wind's long position.| Subsea 7 vs. TGS NOPEC Geophysical | Subsea 7 vs. Aker Solutions ASA | Subsea 7 vs. Storebrand ASA | Subsea 7 vs. Dno ASA |
| Edda Wind vs. Romerike Sparebank | Edda Wind vs. Awilco Drilling PLC | Edda Wind vs. Morrow Bank ASA | Edda Wind vs. Sogn 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
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| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |