Correlation Between Solstad Offshore and Sage Group

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

Diversification Opportunities for Solstad Offshore and Sage Group

0.69

Correlation Coefficient

Solstad Offshore  Sage Group

Poor diversification

The 3 months correlation between Solstad and Sage is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Sage Group go up and down completely randomly.

Pair Corralation between Solstad Offshore and Sage Group

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 2.04 times more return on investment than Sage Group. However, Solstad Offshore is 2.04 times more volatile than Sage Group PLC. It trades about -0.04 of its potential returns per unit of risk. Sage Group PLC is currently generating about -0.12 per unit of risk. If you would invest  3,922  in Solstad Offshore ASA on December 21, 2024 and sell it today you would lose (200.00) from holding Solstad Offshore ASA or give up 5.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Solstad Offshore ASA  vs.  Sage Group PLC

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.

Sage Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sage Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Solstad Offshore and Sage Group

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

The idea behind Solstad Offshore ASA and Sage Group PLC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.