Correlation Between Subsea 7 and North Energy
Can any of the company-specific risk be diversified away by investing in both Subsea 7 and North Energy 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 North Energy 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 North Energy ASA, you can compare the effects of market volatilities on Subsea 7 and North Energy 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 North Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and North Energy.
Diversification Opportunities for Subsea 7 and North Energy
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Subsea and North is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy 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 North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Subsea 7 i.e., Subsea 7 and North Energy go up and down completely randomly.
Pair Corralation between Subsea 7 and North Energy
Assuming the 90 days trading horizon Subsea 7 SA is expected to generate 0.84 times more return on investment than North Energy. However, Subsea 7 SA is 1.2 times less risky than North Energy. It trades about 0.3 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.11 per unit of risk. If you would invest 16,941 in Subsea 7 SA on August 27, 2024 and sell it today you would earn a total of 1,569 from holding Subsea 7 SA or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Subsea 7 SA vs. North Energy ASA
Performance |
| Timeline |
| Subsea 7 SA |
| North Energy ASA |
Subsea 7 and North Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Subsea 7 and North Energy
The main advantage of trading using opposite Subsea 7 and North Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 position performs unexpectedly, North Energy 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 North Energy will offset losses from the drop in North Energy'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 |
| North Energy vs. Arcticzymes Technologies ASA | North Energy vs. Morrow Bank ASA | North Energy vs. Sunndal Sparebank | North Energy vs. Romsdal 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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