Correlation Between Morrow Bank and Shelf Drilling

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

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

Diversification Opportunities for Morrow Bank and Shelf Drilling

0.16

Correlation Coefficient

Morrow Bank  Shelf Drilling

Average diversification

The 3 months correlation between Morrow and Shelf is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Morrow Bank ASA and Shelf Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelf Drilling and Morrow 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 Morrow Bank ASA are associated (or correlated) with Shelf Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelf Drilling has no effect on the direction of Morrow Bank i.e., Morrow Bank and Shelf Drilling go up and down completely randomly.

Pair Corralation between Morrow Bank and Shelf Drilling

Assuming the 90 days trading horizon Morrow Bank ASA is expected to generate 0.48 times more return on investment than Shelf Drilling. However, Morrow Bank ASA is 2.09 times less risky than Shelf Drilling. It trades about 0.24 of its potential returns per unit of risk. Shelf Drilling is currently generating about -0.02 per unit of risk. If you would invest  630.00  in Morrow Bank ASA on September 5, 2024 and sell it today you would earn a total of  222.00  from holding Morrow Bank ASA or generate 35.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Morrow Bank ASA  vs.  Shelf Drilling

Morrow Bank ASA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morrow Bank ASA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Morrow Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Morrow Bank and Shelf Drilling

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

The idea behind Morrow Bank ASA and Shelf 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.