Correlation Between Itera ASA and Eidesvik Offshore

Can any of the company-specific risk be diversified away by investing in both Itera ASA and Eidesvik Offshore 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 Itera ASA and Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Itera ASA and Eidesvik Offshore

0.66

Correlation Coefficient

Itera ASA  Eidesvik Offshore

Poor diversification

The 3 months correlation between Itera and Eidesvik is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Itera ASA and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA and Itera ASA 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 Itera ASA are associated (or correlated) with Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of Itera ASA i.e., Itera ASA and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between Itera ASA and Eidesvik Offshore

Assuming the 90 days trading horizon Itera ASA is expected to under-perform the Eidesvik Offshore. In addition to that, Itera ASA is 1.52 times more volatile than Eidesvik Offshore ASA. It trades about -0.08 of its total potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.12 per unit of volatility. If you would invest  1,578  in Eidesvik Offshore ASA on September 2, 2024 and sell it today you would lose (256.00) from holding Eidesvik Offshore ASA or give up 16.22% of portfolio value over 90 days.

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

Itera ASA  vs.  Eidesvik Offshore ASA

Itera ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itera ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Itera ASA and Eidesvik Offshore

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

The idea behind Itera ASA and Eidesvik Offshore 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.