Correlation Between Aurskog Sparebank and Odfjell Drilling

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

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

Diversification Opportunities for Aurskog Sparebank and Odfjell Drilling

0.19

Correlation Coefficient

Aurskog Sparebank  Odfjell Drilling

Average diversification

The 3 months correlation between Aurskog and Odfjell is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aurskog Sparebank and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Aurskog Sparebank 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 Aurskog Sparebank 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 Aurskog Sparebank i.e., Aurskog Sparebank and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Aurskog Sparebank and Odfjell Drilling

Assuming the 90 days trading horizon Aurskog Sparebank is expected to under-perform the Odfjell Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Aurskog Sparebank is 2.94 times less risky than Odfjell Drilling. The stock trades about -0.12 of its potential returns per unit of risk. The Odfjell Drilling is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  5,080  in Odfjell Drilling on October 26, 2024 and sell it today you would earn a total of  990.00  from holding Odfjell Drilling or generate 19.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Aurskog Sparebank  vs.  Odfjell Drilling

Aurskog Sparebank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Odfjell Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Odfjell Drilling disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurskog Sparebank and Odfjell Drilling

The main advantage of trading using opposite Aurskog Sparebank and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurskog Sparebank 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 Aurskog Sparebank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.