Correlation Between Kraft Bank and Odfjell Drilling

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

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

Diversification Opportunities for Kraft Bank and Odfjell Drilling

-0.59

Correlation Coefficient

Kraft Bank  Odfjell Drilling

Excellent diversification

The 3 months correlation between Kraft and Odfjell is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Bank Asa and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Kraft Bank 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 Kraft Bank Asa are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Kraft Bank i.e., Kraft Bank and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Kraft Bank and Odfjell Drilling

Assuming the 90 days trading horizon Kraft Bank Asa is expected to under-perform the Odfjell Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Bank Asa is 1.15 times less risky than Odfjell Drilling. The stock trades about -0.07 of its potential returns per unit of risk. The Odfjell Drilling is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,917  in Odfjell Drilling on October 26, 2024 and sell it today you would earn a total of  1,153  from holding Odfjell Drilling or generate 23.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Kraft Bank Asa  vs.  Odfjell Drilling

Kraft Bank Asa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kraft Bank Asa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Odfjell Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Odfjell Drilling disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kraft Bank and Odfjell Drilling

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

The idea behind Kraft Bank Asa and Odfjell Drilling 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.