Correlation Between Archer and Odfjell Technology

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

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

Diversification Opportunities for Archer and Odfjell Technology

-0.05

Correlation Coefficient

Archer  Odfjell Technology

Good diversification

The 3 months correlation between Archer and Odfjell is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Archer Limited and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology and Archer 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 Archer Limited are associated (or correlated) with Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of Archer i.e., Archer and Odfjell Technology go up and down completely randomly.

Pair Corralation between Archer and Odfjell Technology

Assuming the 90 days trading horizon Archer Limited is expected to generate 0.9 times more return on investment than Odfjell Technology. However, Archer Limited is 1.11 times less risky than Odfjell Technology. It trades about 0.38 of its potential returns per unit of risk. Odfjell Technology is currently generating about 0.04 per unit of risk. If you would invest  2,323  in Archer Limited on October 11, 2024 and sell it today you would earn a total of  373.00  from holding Archer Limited or generate 16.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Archer Limited  vs.  Odfjell Technology

Archer Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Archer disclosed solid returns over the last few months and may actually be approaching a breakup point.

Odfjell Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odfjell Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Odfjell Technology is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Archer and Odfjell Technology

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

The idea behind Archer Limited and Odfjell Technology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.