Correlation Between Eidesvik Offshore and Arch Capital

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

Diversification Opportunities for Eidesvik Offshore and Arch Capital

0.55

Correlation Coefficient

Eidesvik Offshore  Arch Capital

Very weak diversification

The 3 months correlation between Eidesvik and Arch is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group 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 Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Arch Capital go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Arch Capital

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to under-perform the Arch Capital. In addition to that, Eidesvik Offshore is 1.48 times more volatile than Arch Capital Group. It trades about -0.04 of its total potential returns per unit of risk. Arch Capital Group is currently generating about -0.02 per unit of volatility. If you would invest  8,695  in Arch Capital Group on December 21, 2024 and sell it today you would lose (203.00) from holding Arch Capital Group or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Eidesvik Offshore ASA  vs.  Arch Capital Group

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

Arch Capital Group

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Eidesvik Offshore ASA and Arch Capital Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.