Correlation Between Bergen Carbon and Dolphin Drilling

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

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

Diversification Opportunities for Bergen Carbon and Dolphin Drilling

0.68

Correlation Coefficient

Bergen Carbon  Dolphin Drilling

Poor diversification

The 3 months correlation between Bergen and Dolphin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bergen Carbon Solutions and Dolphin Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Drilling and Bergen Carbon 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 Bergen Carbon Solutions are associated (or correlated) with Dolphin Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Drilling has no effect on the direction of Bergen Carbon i.e., Bergen Carbon and Dolphin Drilling go up and down completely randomly.

Pair Corralation between Bergen Carbon and Dolphin Drilling

Assuming the 90 days trading horizon Bergen Carbon Solutions is expected to under-perform the Dolphin Drilling. In addition to that, Bergen Carbon is 1.01 times more volatile than Dolphin Drilling AS. It trades about -0.1 of its total potential returns per unit of risk. Dolphin Drilling AS is currently generating about -0.02 per unit of volatility. If you would invest  400.00  in Dolphin Drilling AS on October 23, 2024 and sell it today you would lose (40.00) from holding Dolphin Drilling AS or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Bergen Carbon Solutions  vs.  Dolphin Drilling AS

Bergen Carbon Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bergen Carbon Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Dolphin Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolphin Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dolphin Drilling is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bergen Carbon and Dolphin Drilling

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

The idea behind Bergen Carbon Solutions and Dolphin Drilling AS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.