Correlation Between Eidesvik Offshore and Australian Agricultural

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

Diversification Opportunities for Eidesvik Offshore and Australian Agricultural

0.23

Correlation Coefficient

Eidesvik Offshore  Australian Agricultural

Modest diversification

The 3 months correlation between Eidesvik and Australian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Australian Agricultural go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Australian Agricultural

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 1.52 times more return on investment than Australian Agricultural. However, Eidesvik Offshore is 1.52 times more volatile than Australian Agricultural. It trades about 0.05 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.02 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Eidesvik Offshore ASA  vs.  Australian Agricultural

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.

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Australian Agricultural 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 Australian Agricultural

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

The idea behind Eidesvik Offshore ASA and Australian Agricultural 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.