Correlation Between EIDESVIK OFFSHORE and INDOFOOD AGRI

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

Diversification Opportunities for EIDESVIK OFFSHORE and INDOFOOD AGRI

-0.34

Correlation Coefficient

EIDESVIK OFFSHORE  INDOFOOD AGRI

Very good diversification

The 3 months correlation between EIDESVIK and INDOFOOD is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES 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 INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and INDOFOOD AGRI go up and down completely randomly.

Pair Corralation between EIDESVIK OFFSHORE and INDOFOOD AGRI

Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to generate 1.54 times more return on investment than INDOFOOD AGRI. However, EIDESVIK OFFSHORE is 1.54 times more volatile than INDOFOOD AGRI RES. It trades about 0.05 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.02 per unit of risk. If you would invest  65.00  in EIDESVIK OFFSHORE NK on September 26, 2024 and sell it today you would earn a total of  43.00  from holding EIDESVIK OFFSHORE NK or generate 66.15% return on investment over 90 days.

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

EIDESVIK OFFSHORE NK  vs.  INDOFOOD AGRI RES

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 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.

INDOFOOD AGRI RES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDOFOOD AGRI RES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EIDESVIK OFFSHORE and INDOFOOD AGRI

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

The idea behind EIDESVIK OFFSHORE NK and INDOFOOD AGRI RES 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.