Correlation Between Motorcar Parts and Solstad Offshore

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Can any of the company-specific risk be diversified away by investing in both Motorcar Parts and Solstad Offshore 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 Motorcar Parts and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Motorcar Parts of and Solstad Offshore ASA, you can compare the effects of market volatilities on Motorcar Parts and Solstad Offshore 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 Motorcar Parts with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorcar Parts and Solstad Offshore.

Diversification Opportunities for Motorcar Parts and Solstad Offshore

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Motorcar and Solstad is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Motorcar Parts 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 Motorcar Parts of are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Motorcar Parts i.e., Motorcar Parts and Solstad Offshore go up and down completely randomly.

Pair Corralation between Motorcar Parts and Solstad Offshore

Assuming the 90 days horizon Motorcar Parts of is expected to generate 0.55 times more return on investment than Solstad Offshore. However, Motorcar Parts of is 1.82 times less risky than Solstad Offshore. It trades about 0.3 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.16 per unit of risk. If you would invest  655.00  in Motorcar Parts of on September 18, 2024 and sell it today you would earn a total of  140.00  from holding Motorcar Parts of or generate 21.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Motorcar Parts of  vs.  Solstad Offshore ASA

 Performance 
       Timeline  
Motorcar Parts 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Motorcar Parts reported solid returns over the last few months and may actually be approaching a breakup point.
Solstad Offshore ASA 

Risk-Adjusted Performance

5 of 100

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

Motorcar Parts and Solstad Offshore Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Motorcar Parts and Solstad Offshore

The main advantage of trading using opposite Motorcar Parts and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.
The idea behind Motorcar Parts of and Solstad Offshore ASA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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