Correlation Between KEISEI EL and Solstad Offshore

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

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

Diversification Opportunities for KEISEI EL and Solstad Offshore

0.72

Correlation Coefficient

KEISEI EL  Solstad Offshore

Poor diversification

The 3 months correlation between KEISEI and Solstad is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding KEISEI EL RAILWAY and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and KEISEI EL 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 KEISEI EL RAILWAY are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of KEISEI EL i.e., KEISEI EL and Solstad Offshore go up and down completely randomly.

Pair Corralation between KEISEI EL and Solstad Offshore

Assuming the 90 days trading horizon KEISEI EL RAILWAY is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, KEISEI EL RAILWAY is 1.16 times less risky than Solstad Offshore. The stock trades about -0.3 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  345.00  in Solstad Offshore ASA on October 4, 2024 and sell it today you would lose (15.00) from holding Solstad Offshore ASA or give up 4.35% of portfolio value over 90 days.

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

KEISEI EL RAILWAY  vs.  Solstad Offshore ASA

KEISEI EL RAILWAY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEISEI EL RAILWAY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, KEISEI EL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Solstad Offshore ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEISEI EL and Solstad Offshore

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

The idea behind KEISEI EL RAILWAY and Solstad 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.