Correlation Between Deep Value and Odfjell Technology

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

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

Diversification Opportunities for Deep Value and Odfjell Technology

0.25

Correlation Coefficient

Deep Value  Odfjell Technology

Modest diversification

The 3 months correlation between Deep and Odfjell is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology and Deep Value 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 Deep Value Driller are associated (or correlated) with Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of Deep Value i.e., Deep Value and Odfjell Technology go up and down completely randomly.

Pair Corralation between Deep Value and Odfjell Technology

Assuming the 90 days trading horizon Deep Value Driller is expected to generate 2.25 times more return on investment than Odfjell Technology. However, Deep Value is 2.25 times more volatile than Odfjell Technology. It trades about 0.04 of its potential returns per unit of risk. Odfjell Technology is currently generating about 0.06 per unit of risk. If you would invest  1,477  in Deep Value Driller on December 20, 2024 and sell it today you would earn a total of  89.00  from holding Deep Value Driller or generate 6.03% return on investment over 90 days.

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

Deep Value Driller  vs.  Odfjell Technology

Deep Value Driller

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deep Value Driller are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Deep Value disclosed solid returns over the last few months and may actually be approaching a breakup point.

Odfjell Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Odfjell Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Deep Value and Odfjell Technology

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

The idea behind Deep Value Driller and Odfjell Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.