Correlation Between Eidesvik Offshore and NORTHERN OCEAN

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

Diversification Opportunities for Eidesvik Offshore and NORTHERN OCEAN

-0.64

Correlation Coefficient

Eidesvik Offshore  NORTHERN OCEAN

Excellent diversification

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

Pair Corralation between Eidesvik Offshore and NORTHERN OCEAN

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 1.03 times more return on investment than NORTHERN OCEAN. However, Eidesvik Offshore is 1.03 times more volatile than NORTHERN OCEAN LTD. It trades about 0.05 of its potential returns per unit of risk. NORTHERN OCEAN LTD is currently generating about -0.01 per unit of risk. If you would invest  64.00  in Eidesvik Offshore ASA on September 2, 2024 and sell it today you would earn a total of  45.00  from holding Eidesvik Offshore ASA or generate 70.31% return on investment over 90 days.

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

Eidesvik Offshore ASA  vs.  NORTHERN OCEAN LTD

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NORTHERN OCEAN LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHERN OCEAN LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NORTHERN OCEAN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eidesvik Offshore and NORTHERN OCEAN

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

The idea behind Eidesvik Offshore ASA and NORTHERN OCEAN LTD 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.