Correlation Between Edda Wind and Odfjell Technology

Can any of the company-specific risk be diversified away by investing in both Edda Wind and Odfjell Technology 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 Edda Wind and Odfjell Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edda Wind ASA and Odfjell Technology, you can compare the effects of market volatilities on Edda Wind and Odfjell Technology 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 Edda Wind with a short position of Odfjell Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edda Wind and Odfjell Technology.

Diversification Opportunities for Edda Wind and Odfjell Technology

0.06

Correlation Coefficient

Edda Wind  Odfjell Technology

Significant diversification

The 3 months correlation between Edda and Odfjell is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Edda Wind ASA and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology and Edda Wind 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 Edda Wind ASA are associated (or correlated) with Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of Edda Wind i.e., Edda Wind and Odfjell Technology go up and down completely randomly.

Pair Corralation between Edda Wind and Odfjell Technology

Assuming the 90 days trading horizon Edda Wind ASA is expected to under-perform the Odfjell Technology. But the stock apears to be less risky and, when comparing its historical volatility, Edda Wind ASA is 1.24 times less risky than Odfjell Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Odfjell Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,881  in Odfjell Technology on September 14, 2024 and sell it today you would lose (121.00) from holding Odfjell Technology or give up 2.48% of portfolio value over 90 days.

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

Edda Wind ASA  vs.  Odfjell Technology

Edda Wind ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edda Wind ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Edda Wind is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Odfjell Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odfjell Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Odfjell Technology is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Edda Wind and Odfjell Technology

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

The idea behind Edda Wind ASA and Odfjell Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.