Correlation Between Eidesvik Offshore and North American

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

Diversification Opportunities for Eidesvik Offshore and North American

0.86

Correlation Coefficient

Eidesvik Offshore  North American

Very poor diversification

The 3 months correlation between Eidesvik and North is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and North American go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and North American

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 0.93 times more return on investment than North American. However, Eidesvik Offshore ASA is 1.08 times less risky than North American. It trades about -0.04 of its potential returns per unit of risk. North American Construction is currently generating about -0.18 per unit of risk. If you would invest  108.00  in Eidesvik Offshore ASA on December 30, 2024 and sell it today you would lose (7.00) from holding Eidesvik Offshore ASA or give up 6.48% of portfolio value over 90 days.

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

Eidesvik Offshore ASA  vs.  North American Construction

Eidesvik Offshore ASA

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

North American Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eidesvik Offshore and North American

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

The idea behind Eidesvik Offshore ASA and North American Construction 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.