Correlation Between Eidesvik Offshore and Veidekke ASA

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

Diversification Opportunities for Eidesvik Offshore and Veidekke ASA

-0.64

Correlation Coefficient

Eidesvik Offshore  Veidekke ASA

Excellent diversification

The 3 months correlation between Eidesvik and Veidekke is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Veidekke ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veidekke ASA 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 Veidekke ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veidekke ASA has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and Veidekke ASA go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Veidekke ASA

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to under-perform the Veidekke ASA. In addition to that, Eidesvik Offshore is 1.83 times more volatile than Veidekke ASA. It trades about -0.03 of its total potential returns per unit of risk. Veidekke ASA is currently generating about 0.19 per unit of volatility. If you would invest  12,400  in Veidekke ASA on October 20, 2024 and sell it today you would earn a total of  1,600  from holding Veidekke ASA or generate 12.9% return on investment over 90 days.

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

Eidesvik Offshore ASA  vs.  Veidekke ASA

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. Despite quite persistent essential indicators, Eidesvik Offshore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Veidekke ASA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veidekke ASA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Veidekke ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eidesvik Offshore and Veidekke ASA

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

The idea behind Eidesvik Offshore ASA and Veidekke ASA 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.