Correlation Between Kitron ASA and Solstad Offsho

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

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

Diversification Opportunities for Kitron ASA and Solstad Offsho

0.52

Correlation Coefficient

Kitron ASA  Solstad Offsho

Very weak diversification

The 3 months correlation between Kitron and Solstad is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kitron ASA and Solstad Offsho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offsho and Kitron 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 Kitron ASA are associated (or correlated) with Solstad Offsho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offsho has no effect on the direction of Kitron ASA i.e., Kitron ASA and Solstad Offsho go up and down completely randomly.

Pair Corralation between Kitron ASA and Solstad Offsho

Assuming the 90 days trading horizon Kitron ASA is expected to generate 4.09 times less return on investment than Solstad Offsho. But when comparing it to its historical volatility, Kitron ASA is 2.58 times less risky than Solstad Offsho. It trades about 0.08 of its potential returns per unit of risk. Solstad Offsho is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,210  in Solstad Offsho on September 13, 2024 and sell it today you would earn a total of  642.00  from holding Solstad Offsho or generate 20.0% return on investment over 90 days.

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

Kitron ASA  vs.  Solstad Offsho

Kitron ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Solstad Offsho

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Solstad Offsho disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kitron ASA and Solstad Offsho

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

The idea behind Kitron ASA and Solstad Offsho 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.