Correlation Between EIDESVIK OFFSHORE and Brown Forman

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

Diversification Opportunities for EIDESVIK OFFSHORE and Brown Forman

-0.16

Correlation Coefficient

EIDESVIK OFFSHORE  Brown Forman

Good diversification

The 3 months correlation between EIDESVIK and Brown is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and Brown Forman go up and down completely randomly.

Pair Corralation between EIDESVIK OFFSHORE and Brown Forman

Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to generate 1.05 times more return on investment than Brown Forman. However, EIDESVIK OFFSHORE is 1.05 times more volatile than Brown Forman. It trades about -0.04 of its potential returns per unit of risk. Brown Forman is currently generating about -0.12 per unit of risk. If you would invest  108.00  in EIDESVIK OFFSHORE NK on December 22, 2024 and sell it today you would lose (8.00) from holding EIDESVIK OFFSHORE NK or give up 7.41% of portfolio value over 90 days.

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

EIDESVIK OFFSHORE NK  vs.  Brown Forman

EIDESVIK OFFSHORE

Risk-Adjusted Performance

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.

Brown Forman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EIDESVIK OFFSHORE and Brown Forman

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

The idea behind EIDESVIK OFFSHORE NK and Brown Forman 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.