Correlation Between Odfjell Drilling and Weiss Korea

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

By analyzing existing cross correlation between Odfjell Drilling and Weiss Korea Opportunity, you can compare the effects of market volatilities on Odfjell Drilling and Weiss Korea 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 Weiss Korea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and Weiss Korea.

Diversification Opportunities for Odfjell Drilling and Weiss Korea

-0.35

Correlation Coefficient

Odfjell Drilling  Weiss Korea

Very good diversification

The 3 months correlation between Odfjell and Weiss is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Weiss Korea Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weiss Korea Opportunity 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 Weiss Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weiss Korea Opportunity has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Weiss Korea go up and down completely randomly.

Pair Corralation between Odfjell Drilling and Weiss Korea

Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.69 times more return on investment than Weiss Korea. However, Odfjell Drilling is 1.46 times less risky than Weiss Korea. It trades about 0.18 of its potential returns per unit of risk. Weiss Korea Opportunity is currently generating about 0.03 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Odfjell Drilling  vs.  Weiss Korea Opportunity

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.

Weiss Korea Opportunity

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weiss Korea Opportunity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Weiss Korea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Odfjell Drilling and Weiss Korea

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

The idea behind Odfjell Drilling and Weiss Korea Opportunity 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.