Correlation Between Solstad Offshore and Investment

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

Diversification Opportunities for Solstad Offshore and Investment

-0.05

Correlation Coefficient

Solstad Offshore  Investment

Good diversification

The 3 months correlation between Solstad and Investment is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Investment go up and down completely randomly.

Pair Corralation between Solstad Offshore and Investment

Assuming the 90 days trading horizon Solstad Offshore is expected to generate 1.11 times less return on investment than Investment. In addition to that, Solstad Offshore is 4.23 times more volatile than The Investment. It trades about 0.01 of its total potential returns per unit of risk. The Investment is currently generating about 0.06 per unit of volatility. If you would invest  28,500  in The Investment on October 23, 2024 and sell it today you would earn a total of  7,900  from holding The Investment or generate 27.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Solstad Offshore ASA  vs.  The Investment

Solstad Offshore ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 11 (%) 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.

Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Solstad Offshore and Investment

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

The idea behind Solstad Offshore ASA and The Investment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.