Correlation Between Dolphin Drilling and Lea Bank

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

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

Diversification Opportunities for Dolphin Drilling and Lea Bank

0.32

Correlation Coefficient

Dolphin Drilling  Lea Bank

Weak diversification

The 3 months correlation between Dolphin and Lea is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dolphin Drilling AS and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank ASA and Dolphin Drilling 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 Dolphin Drilling AS are associated (or correlated) with Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Dolphin Drilling i.e., Dolphin Drilling and Lea Bank go up and down completely randomly.

Pair Corralation between Dolphin Drilling and Lea Bank

Assuming the 90 days trading horizon Dolphin Drilling AS is expected to under-perform the Lea Bank. In addition to that, Dolphin Drilling is 1.45 times more volatile than Lea Bank ASA. It trades about -0.03 of its total potential returns per unit of risk. Lea Bank ASA is currently generating about 0.15 per unit of volatility. If you would invest  775.00  in Lea Bank ASA on September 5, 2024 and sell it today you would earn a total of  205.00  from holding Lea Bank ASA or generate 26.45% return on investment over 90 days.

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

Dolphin Drilling AS  vs.  Lea Bank ASA

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 latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Lea Bank ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lea Bank ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Lea Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dolphin Drilling and Lea Bank

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

The idea behind Dolphin Drilling AS and Lea Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.