Correlation Between Brunswick and Solstad Offshore

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

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

Diversification Opportunities for Brunswick and Solstad Offshore

0.0

Correlation Coefficient

Brunswick  Solstad Offshore

Pay attention - limited upside

The 3 months correlation between Brunswick and Solstad is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick 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 Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and Solstad Offshore go up and down completely randomly.

Pair Corralation between Brunswick and Solstad Offshore

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 2.24 times less risky than Solstad Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  151.00  in Solstad Offshore ASA on October 7, 2024 and sell it today you would earn a total of  158.00  from holding Solstad Offshore ASA or generate 104.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Brunswick  vs.  Solstad Offshore ASA

Brunswick

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Brunswick and Solstad Offshore

The main advantage of trading using opposite Brunswick and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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 Brunswick 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.