Correlation Between Eidesvik Offshore and Aedas Homes

Can any of the company-specific risk be diversified away by investing in both Eidesvik Offshore and Aedas Homes 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 Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eidesvik Offshore ASA and Aedas Homes SA, you can compare the effects of market volatilities on Eidesvik Offshore and Aedas Homes 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 Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eidesvik Offshore and Aedas Homes.

Diversification Opportunities for Eidesvik Offshore and Aedas Homes

-0.01

Correlation Coefficient

Eidesvik Offshore  Aedas Homes

Good diversification

The 3 months correlation between Eidesvik and Aedas is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 ASA are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Aedas Homes go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Aedas Homes

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 1.14 times more return on investment than Aedas Homes. However, Eidesvik Offshore is 1.14 times more volatile than Aedas Homes SA. It trades about -0.03 of its potential returns per unit of risk. Aedas Homes SA is currently generating about -0.05 per unit of risk. If you would invest  111.00  in Eidesvik Offshore ASA on September 27, 2024 and sell it today you would lose (3.00) from holding Eidesvik Offshore ASA or give up 2.7% of portfolio value over 90 days.

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

Eidesvik Offshore ASA  vs.  Aedas Homes SA

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Aedas Homes SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eidesvik Offshore and Aedas Homes

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

The idea behind Eidesvik Offshore ASA and Aedas Homes SA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.