Correlation Between Solstad Offshore and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Solstad Offshore and Sumitomo Chemical 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 Sumitomo Chemical 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 Sumitomo Chemical, you can compare the effects of market volatilities on Solstad Offshore and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Sumitomo Chemical.
Diversification Opportunities for Solstad Offshore and Sumitomo Chemical
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Solstad and Sumitomo is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Solstad Offshore and Sumitomo Chemical
Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 4.42 times more return on investment than Sumitomo Chemical. However, Solstad Offshore is 4.42 times more volatile than Sumitomo Chemical. It trades about 0.21 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.24 per unit of risk. If you would invest 278.00 in Solstad Offshore ASA on September 1, 2024 and sell it today you would earn a total of 71.00 from holding Solstad Offshore ASA or generate 25.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solstad Offshore ASA vs. Sumitomo Chemical
Performance |
| Timeline |
| Solstad Offshore ASA |
| Sumitomo Chemical |
Solstad Offshore and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solstad Offshore and Sumitomo Chemical
The main advantage of trading using opposite Solstad Offshore and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Solstad Offshore vs. Tradeweb Markets | Solstad Offshore vs. National Retail Properties | Solstad Offshore vs. Zoom Video Communications | Solstad Offshore vs. Auto Trader Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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