Correlation Between Bonheur and Solstad Offsho

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

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

Diversification Opportunities for Bonheur and Solstad Offsho

0.41

Correlation Coefficient

Bonheur  Solstad Offsho

Very weak diversification

The 3 months correlation between Bonheur and Solstad is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bonheur and Solstad Offsho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offsho and Bonheur 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 Bonheur are associated (or correlated) with Solstad Offsho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offsho has no effect on the direction of Bonheur i.e., Bonheur and Solstad Offsho go up and down completely randomly.

Pair Corralation between Bonheur and Solstad Offsho

Assuming the 90 days trading horizon Bonheur is expected to under-perform the Solstad Offsho. But the stock apears to be less risky and, when comparing its historical volatility, Bonheur is 1.59 times less risky than Solstad Offsho. The stock trades about -0.17 of its potential returns per unit of risk. The Solstad Offsho is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  4,100  in Solstad Offsho on December 2, 2024 and sell it today you would lose (500.00) from holding Solstad Offsho or give up 12.2% of portfolio value over 90 days.

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

Bonheur  vs.  Solstad Offsho

Bonheur

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bonheur has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Solstad Offsho

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offsho has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bonheur and Solstad Offsho

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

The idea behind Bonheur and Solstad Offsho 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.