Correlation Between Solstad Offshore and Bank of Ireland

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

Diversification Opportunities for Solstad Offshore and Bank of Ireland

-0.53

Correlation Coefficient

Solstad Offshore  Bank of Ireland

Excellent diversification

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

Pair Corralation between Solstad Offshore and Bank of Ireland

Assuming the 90 days trading horizon Solstad Offshore is expected to generate 1.16 times less return on investment than Bank of Ireland. In addition to that, Solstad Offshore is 1.25 times more volatile than Bank of Ireland. It trades about 0.08 of its total potential returns per unit of risk. Bank of Ireland is currently generating about 0.12 per unit of volatility. If you would invest  849.00  in Bank of Ireland on October 9, 2024 and sell it today you would earn a total of  38.00  from holding Bank of Ireland or generate 4.48% return on investment over 90 days.

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

Solstad Offshore ASA  vs.  Bank of Ireland

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 uncertain basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Solstad Offshore and Bank of Ireland

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

The idea behind Solstad Offshore ASA and Bank of Ireland 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.