Correlation Between LIFE + and ODFJELL DRILLLTD

Can any of the company-specific risk be diversified away by investing in both LIFE + and ODFJELL DRILLLTD 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 LIFE + and ODFJELL DRILLLTD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LIFE BANC SPLIT and ODFJELL DRILLLTD DL 01, you can compare the effects of market volatilities on LIFE + and ODFJELL DRILLLTD 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 LIFE + with a short position of ODFJELL DRILLLTD. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and ODFJELL DRILLLTD.

Diversification Opportunities for LIFE + and ODFJELL DRILLLTD

-0.18

Correlation Coefficient

LIFE +  ODFJELL DRILLLTD

Good diversification

The 3 months correlation between LIFE and ODFJELL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and ODFJELL DRILLLTD DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODFJELL DRILLLTD and LIFE + 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 LIFE BANC SPLIT are associated (or correlated) with ODFJELL DRILLLTD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODFJELL DRILLLTD has no effect on the direction of LIFE + i.e., LIFE + and ODFJELL DRILLLTD go up and down completely randomly.

Pair Corralation between LIFE + and ODFJELL DRILLLTD

Assuming the 90 days horizon LIFE BANC SPLIT is expected to under-perform the ODFJELL DRILLLTD. In addition to that, LIFE + is 1.45 times more volatile than ODFJELL DRILLLTD DL 01. It trades about -0.02 of its total potential returns per unit of risk. ODFJELL DRILLLTD DL 01 is currently generating about 0.18 per unit of volatility. If you would invest  412.00  in ODFJELL DRILLLTD DL 01 on December 29, 2024 and sell it today you would earn a total of  104.00  from holding ODFJELL DRILLLTD DL 01 or generate 25.24% return on investment over 90 days.

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

LIFE BANC SPLIT  vs.  ODFJELL DRILLLTD DL 01

LIFE BANC SPLIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFE BANC SPLIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LIFE + is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ODFJELL DRILLLTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ODFJELL DRILLLTD DL 01 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ODFJELL DRILLLTD reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFE + and ODFJELL DRILLLTD

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

The idea behind LIFE BANC SPLIT and ODFJELL DRILLLTD DL 01 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.