Correlation Between Eidesvik Offshore and Stolt Nielsen

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

Diversification Opportunities for Eidesvik Offshore and Stolt Nielsen

0.78

Correlation Coefficient

Eidesvik Offshore  Stolt Nielsen

Poor diversification

The 3 months correlation between Eidesvik and Stolt is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Stolt Nielsen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stolt Nielsen Limited 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 Stolt Nielsen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stolt Nielsen Limited has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Stolt Nielsen go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Stolt Nielsen

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 0.77 times more return on investment than Stolt Nielsen. However, Eidesvik Offshore ASA is 1.3 times less risky than Stolt Nielsen. It trades about -0.08 of its potential returns per unit of risk. Stolt Nielsen Limited is currently generating about -0.07 per unit of risk. If you would invest  1,338  in Eidesvik Offshore ASA on December 30, 2024 and sell it today you would lose (148.00) from holding Eidesvik Offshore ASA or give up 11.06% of portfolio value over 90 days.

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

Eidesvik Offshore ASA  vs.  Stolt Nielsen Limited

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. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Stolt Nielsen Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Eidesvik Offshore and Stolt Nielsen

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

The idea behind Eidesvik Offshore ASA and Stolt Nielsen Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.