Correlation Between Melhus Sparebank and Odfjell Drilling

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

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

Diversification Opportunities for Melhus Sparebank and Odfjell Drilling

0.35

Correlation Coefficient

Melhus Sparebank  Odfjell Drilling

Weak diversification

The 3 months correlation between Melhus and Odfjell is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Melhus Sparebank and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Melhus Sparebank 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 Melhus Sparebank 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 Melhus Sparebank i.e., Melhus Sparebank and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Melhus Sparebank and Odfjell Drilling

Assuming the 90 days trading horizon Melhus Sparebank is expected to generate 1.55 times less return on investment than Odfjell Drilling. But when comparing it to its historical volatility, Melhus Sparebank is 1.62 times less risky than Odfjell Drilling. It trades about 0.16 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,017  in Odfjell Drilling on December 28, 2024 and sell it today you would earn a total of  903.00  from holding Odfjell Drilling or generate 18.0% return on investment over 90 days.

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

Melhus Sparebank  vs.  Odfjell Drilling

Melhus Sparebank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melhus Sparebank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Melhus Sparebank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Odfjell Drilling

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 11 (%) 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 Melhus Sparebank and Odfjell Drilling

The main advantage of trading using opposite Melhus Sparebank and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melhus Sparebank 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 Melhus Sparebank 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.