Correlation Between Eidesvik Offshore and ORIX

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

Diversification Opportunities for Eidesvik Offshore and ORIX

0.58

Correlation Coefficient

Eidesvik Offshore  ORIX

Very weak diversification

The 3 months correlation between Eidesvik and ORIX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX 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 ORIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and ORIX go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and ORIX

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to under-perform the ORIX. In addition to that, Eidesvik Offshore is 1.35 times more volatile than ORIX Corporation. It trades about -0.04 of its total potential returns per unit of risk. ORIX Corporation is currently generating about -0.02 per unit of volatility. If you would invest  2,040  in ORIX Corporation on December 29, 2024 and sell it today you would lose (60.00) from holding ORIX Corporation or give up 2.94% of portfolio value over 90 days.

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

Eidesvik Offshore ASA  vs.  ORIX Corp.

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

ORIX

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Eidesvik Offshore and ORIX

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

The idea behind Eidesvik Offshore ASA and ORIX Corporation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.