Correlation Between AP Moeller and Odfjell Drilling

Can any of the company-specific risk be diversified away by investing in both AP Moeller and Odfjell Drilling 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 AP Moeller and Odfjell Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Moeller and Odfjell Drilling, you can compare the effects of market volatilities on AP Moeller and Odfjell Drilling 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 AP Moeller with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Moeller and Odfjell Drilling.

Diversification Opportunities for AP Moeller and Odfjell Drilling

-0.03

Correlation Coefficient

AP Moeller  Odfjell Drilling

Good diversification

The 3 months correlation between 0O77 and Odfjell is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and AP Moeller 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 AP Moeller are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of AP Moeller i.e., AP Moeller and Odfjell Drilling go up and down completely randomly.

Pair Corralation between AP Moeller and Odfjell Drilling

Assuming the 90 days trading horizon AP Moeller is expected to generate 1.08 times more return on investment than Odfjell Drilling. However, AP Moeller is 1.08 times more volatile than Odfjell Drilling. It trades about 0.16 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.07 per unit of risk. If you would invest  1,064,000  in AP Moeller on October 7, 2024 and sell it today you would earn a total of  178,500  from holding AP Moeller or generate 16.78% return on investment over 90 days.

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

AP Moeller   vs.  Odfjell Drilling

AP Moeller

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AP Moeller unveiled solid returns over the last few months and may actually be approaching a breakup point.

Odfjell Drilling

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Odfjell Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AP Moeller and Odfjell Drilling

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

The idea behind AP Moeller and Odfjell Drilling 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 Commodity Directory module to find actively traded commodities issued by global exchanges.