Correlation Between EIDESVIK OFFSHORE and COMPASS PATHW

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

By analyzing existing cross correlation between EIDESVIK OFFSHORE NK and COMPASS PATHW SPADR, you can compare the effects of market volatilities on EIDESVIK OFFSHORE and COMPASS PATHW 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 EIDESVIK OFFSHORE with a short position of COMPASS PATHW. Check out your portfolio center. Please also check ongoing floating volatility patterns of EIDESVIK OFFSHORE and COMPASS PATHW.

Diversification Opportunities for EIDESVIK OFFSHORE and COMPASS PATHW

0.64

Correlation Coefficient

EIDESVIK OFFSHORE  COMPASS PATHW

Poor diversification

The 3 months correlation between EIDESVIK and COMPASS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK and COMPASS PATHW SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS PATHW SPADR and EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE NK are associated (or correlated) with COMPASS PATHW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPASS PATHW SPADR has no effect on the direction of EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and COMPASS PATHW go up and down completely randomly.

Pair Corralation between EIDESVIK OFFSHORE and COMPASS PATHW

Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to generate 0.6 times more return on investment than COMPASS PATHW. However, EIDESVIK OFFSHORE NK is 1.68 times less risky than COMPASS PATHW. It trades about 0.04 of its potential returns per unit of risk. COMPASS PATHW SPADR is currently generating about 0.02 per unit of risk. If you would invest  110.00  in EIDESVIK OFFSHORE NK on October 10, 2024 and sell it today you would earn a total of  2.00  from holding EIDESVIK OFFSHORE NK or generate 1.82% return on investment over 90 days.

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

EIDESVIK OFFSHORE NK  vs.  COMPASS PATHW SPADR

EIDESVIK OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EIDESVIK OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EIDESVIK OFFSHORE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

COMPASS PATHW SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMPASS PATHW SPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with EIDESVIK OFFSHORE and COMPASS PATHW

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

The idea behind EIDESVIK OFFSHORE NK and COMPASS PATHW SPADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.