Correlation Between Eidesvik Offshore and Tsingtao Brewery

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

Diversification Opportunities for Eidesvik Offshore and Tsingtao Brewery

0.59

Correlation Coefficient

Eidesvik Offshore  Tsingtao Brewery

Very weak diversification

The 3 months correlation between Eidesvik and Tsingtao is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Tsingtao Brewery

Assuming the 90 days trading horizon Eidesvik Offshore is expected to generate 2.3 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, Eidesvik Offshore ASA is 1.24 times less risky than Tsingtao Brewery. It trades about 0.06 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  608.00  in Tsingtao Brewery on October 7, 2024 and sell it today you would earn a total of  56.00  from holding Tsingtao Brewery or generate 9.21% return on investment over 90 days.

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

Eidesvik Offshore ASA  vs.  Tsingtao Brewery

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eidesvik Offshore and Tsingtao Brewery

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

The idea behind Eidesvik Offshore ASA and Tsingtao Brewery 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.