Correlation Between Odfjell Drilling and CleanTech Lithium

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

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

Diversification Opportunities for Odfjell Drilling and CleanTech Lithium

-0.73

Correlation Coefficient

Odfjell Drilling  CleanTech Lithium

Pay attention - limited upside

The 3 months correlation between Odfjell and CleanTech is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and CleanTech Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanTech Lithium plc and Odfjell Drilling 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 Odfjell Drilling are associated (or correlated) with CleanTech Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanTech Lithium plc has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and CleanTech Lithium go up and down completely randomly.

Pair Corralation between Odfjell Drilling and CleanTech Lithium

Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.57 times more return on investment than CleanTech Lithium. However, Odfjell Drilling is 1.76 times less risky than CleanTech Lithium. It trades about 0.18 of its potential returns per unit of risk. CleanTech Lithium plc is currently generating about -0.04 per unit of risk. If you would invest  4,962  in Odfjell Drilling on October 26, 2024 and sell it today you would earn a total of  1,238  from holding Odfjell Drilling or generate 24.95% return on investment over 90 days.

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

Odfjell Drilling  vs.  CleanTech Lithium plc

Odfjell Drilling

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Odfjell Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

CleanTech Lithium plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CleanTech Lithium 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 Odfjell Drilling and CleanTech Lithium

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

The idea behind Odfjell Drilling and CleanTech Lithium 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.