Correlation Between Dolphin Drilling and RomReal

Can any of the company-specific risk be diversified away by investing in both Dolphin Drilling and RomReal 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 RomReal 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 RomReal Limited, you can compare the effects of market volatilities on Dolphin Drilling and RomReal 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 RomReal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dolphin Drilling and RomReal.

Diversification Opportunities for Dolphin Drilling and RomReal

0.27

Correlation Coefficient

Dolphin Drilling  RomReal

Modest diversification

The 3 months correlation between Dolphin and RomReal is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dolphin Drilling AS and RomReal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RomReal Limited 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 RomReal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RomReal Limited has no effect on the direction of Dolphin Drilling i.e., Dolphin Drilling and RomReal go up and down completely randomly.

Pair Corralation between Dolphin Drilling and RomReal

Assuming the 90 days trading horizon Dolphin Drilling AS is expected to under-perform the RomReal. In addition to that, Dolphin Drilling is 1.39 times more volatile than RomReal Limited. It trades about -0.13 of its total potential returns per unit of risk. RomReal Limited is currently generating about 0.01 per unit of volatility. If you would invest  280.00  in RomReal Limited on December 5, 2024 and sell it today you would lose (18.00) from holding RomReal Limited or give up 6.43% of portfolio value over 90 days.

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

Dolphin Drilling AS  vs.  RomReal Limited

Dolphin Drilling

Risk-Adjusted Performance

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 conflicting 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.

RomReal Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dolphin Drilling and RomReal

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

The idea behind Dolphin Drilling AS and RomReal Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.