Correlation Between Solstad Offshore and Encavis AG
Can any of the company-specific risk be diversified away by investing in both Solstad Offshore and Encavis AG 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 Offshore and Encavis AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solstad Offshore ASA and Encavis AG, you can compare the effects of market volatilities on Solstad Offshore and Encavis AG 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 Offshore with a short position of Encavis AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Encavis AG.
Diversification Opportunities for Solstad Offshore and Encavis AG
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solstad and Encavis is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Encavis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encavis AG and Solstad Offshore 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 Offshore ASA are associated (or correlated) with Encavis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encavis AG has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Encavis AG go up and down completely randomly.
Pair Corralation between Solstad Offshore and Encavis AG
Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 10.75 times more return on investment than Encavis AG. However, Solstad Offshore is 10.75 times more volatile than Encavis AG. It trades about 0.06 of its potential returns per unit of risk. Encavis AG is currently generating about 0.07 per unit of risk. If you would invest 327.00 in Solstad Offshore ASA on October 24, 2024 and sell it today you would earn a total of 6.00 from holding Solstad Offshore ASA or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solstad Offshore ASA vs. Encavis AG
Performance |
| Timeline |
| Solstad Offshore ASA |
| Encavis AG |
Solstad Offshore and Encavis AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solstad Offshore and Encavis AG
The main advantage of trading using opposite Solstad Offshore and Encavis AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore position performs unexpectedly, Encavis AG 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 Encavis AG will offset losses from the drop in Encavis AG's long position.| Solstad Offshore vs. AP Mller | Solstad Offshore vs. AP Mller | Solstad Offshore vs. ZIM Integrated Shipping | Solstad Offshore vs. DFDS AS |
| Encavis AG vs. PennantPark Investment | Encavis AG vs. Solstad Offshore ASA | Encavis AG vs. EIDESVIK OFFSHORE NK | Encavis AG vs. Guangdong Investment Limited |
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.
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