Correlation Between Eidesvik Offshore and Marathon Petroleum

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

Diversification Opportunities for Eidesvik Offshore and Marathon Petroleum

0.38

Correlation Coefficient

Eidesvik Offshore  Marathon Petroleum

Weak diversification

The 3 months correlation between Eidesvik and Marathon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Marathon Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum Corp 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 Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum Corp has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Marathon Petroleum

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 1.48 times more return on investment than Marathon Petroleum. However, Eidesvik Offshore is 1.48 times more volatile than Marathon Petroleum Corp. It trades about 0.05 of its potential returns per unit of risk. Marathon Petroleum Corp is currently generating about 0.04 per unit of risk. If you would invest  67.00  in Eidesvik Offshore ASA on September 18, 2024 and sell it today you would earn a total of  44.00  from holding Eidesvik Offshore ASA or generate 65.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Eidesvik Offshore ASA  vs.  Marathon Petroleum Corp

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 comparatively stable basic indicators, Eidesvik Offshore is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Marathon Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Eidesvik Offshore ASA and Marathon Petroleum Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.