Correlation Between Booking Holdings and Odfjell Drilling

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

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

Diversification Opportunities for Booking Holdings and Odfjell Drilling

-0.1

Correlation Coefficient

Booking Holdings  Odfjell Drilling

Good diversification

The 3 months correlation between Booking and Odfjell is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Booking Holdings 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 Booking Holdings 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 Booking Holdings i.e., Booking Holdings and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Booking Holdings and Odfjell Drilling

Assuming the 90 days trading horizon Booking Holdings is expected to generate 9.0 times more return on investment than Odfjell Drilling. However, Booking Holdings is 9.0 times more volatile than Odfjell Drilling. It trades about 0.07 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.18 per unit of risk. If you would invest  433,813  in Booking Holdings on October 26, 2024 and sell it today you would earn a total of  27,673  from holding Booking Holdings or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Booking Holdings  vs.  Odfjell Drilling

Booking Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Booking Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Booking Holdings and Odfjell Drilling

The main advantage of trading using opposite Booking Holdings and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booking Holdings 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 Booking Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.