Correlation Between Solstad Offshore and Axway Software

Can any of the company-specific risk be diversified away by investing in both Solstad Offshore and Axway Software 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 Axway Software 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 Axway Software SA, you can compare the effects of market volatilities on Solstad Offshore and Axway Software 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 Axway Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Axway Software.

Diversification Opportunities for Solstad Offshore and Axway Software

0.53

Correlation Coefficient

Solstad Offshore  Axway Software

Very weak diversification

The 3 months correlation between Solstad and Axway is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA 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 Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Axway Software go up and down completely randomly.

Pair Corralation between Solstad Offshore and Axway Software

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 3.62 times more return on investment than Axway Software. However, Solstad Offshore is 3.62 times more volatile than Axway Software SA. It trades about 0.05 of its potential returns per unit of risk. Axway Software SA is currently generating about -0.2 per unit of risk. If you would invest  3,922  in Solstad Offshore ASA on October 12, 2024 and sell it today you would earn a total of  88.00  from holding Solstad Offshore ASA or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.95%
Values	Daily Returns

Solstad Offshore ASA  vs.  Axway Software SA

Solstad Offshore ASA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Axway Software SA

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Axway Software SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Axway Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Solstad Offshore and Axway Software

The main advantage of trading using opposite Solstad Offshore and Axway Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore position performs unexpectedly, Axway Software 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 Axway Software will offset losses from the drop in Axway Software's long position.

The idea behind Solstad Offshore ASA and Axway Software SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.