Correlation Between Solstad Offshore and BW Offshore

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

Diversification Opportunities for Solstad Offshore and BW Offshore

0.28

Correlation Coefficient

Solstad Offshore  BW Offshore

Modest diversification

The 3 months correlation between Solstad and 0RKH is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and BW Offshore go up and down completely randomly.

Pair Corralation between Solstad Offshore and BW Offshore

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Solstad Offshore ASA is 1.45 times less risky than BW Offshore. The stock trades about -0.04 of its potential returns per unit of risk. The BW Offshore is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,624  in BW Offshore on December 21, 2024 and sell it today you would earn a total of  381.00  from holding BW Offshore or generate 14.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Solstad Offshore ASA  vs.  BW Offshore

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Solstad Offshore is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

BW Offshore

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BW Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solstad Offshore and BW Offshore

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

The idea behind Solstad Offshore ASA and BW Offshore 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.