Correlation Between Kongsberg Automotive and Solstad Offsho

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

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

Diversification Opportunities for Kongsberg Automotive and Solstad Offsho

-0.23

Correlation Coefficient

Kongsberg Automotive  Solstad Offsho

Very good diversification

The 3 months correlation between Kongsberg and Solstad is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Automotive Holding and Solstad Offsho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offsho and Kongsberg Automotive 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 Kongsberg Automotive Holding 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 Kongsberg Automotive i.e., Kongsberg Automotive and Solstad Offsho go up and down completely randomly.

Pair Corralation between Kongsberg Automotive and Solstad Offsho

Assuming the 90 days trading horizon Kongsberg Automotive is expected to generate 1.8 times less return on investment than Solstad Offsho. In addition to that, Kongsberg Automotive is 1.06 times more volatile than Solstad Offsho. It trades about 0.03 of its total potential returns per unit of risk. Solstad Offsho is currently generating about 0.06 per unit of volatility. If you would invest  3,714  in Solstad Offsho on August 31, 2024 and sell it today you would earn a total of  406.00  from holding Solstad Offsho or generate 10.93% return on investment over 90 days.

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

Kongsberg Automotive Holding  vs.  Solstad Offsho

Kongsberg Automotive

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Automotive Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kongsberg Automotive may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Solstad Offsho

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 4 (%) 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 Kongsberg Automotive and Solstad Offsho

The main advantage of trading using opposite Kongsberg Automotive and Solstad Offsho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kongsberg Automotive 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 Kongsberg Automotive Holding 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 Commodity Directory module to find actively traded commodities issued by global exchanges.