Correlation Between North American and Eidesvik Offshore

Can any of the company-specific risk be diversified away by investing in both North American and Eidesvik Offshore 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 North American and Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for North American and Eidesvik Offshore

-0.38

Correlation Coefficient

North American  Eidesvik Offshore

Very good diversification

The 3 months correlation between North and Eidesvik is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA and North American 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 North American Construction are associated (or correlated) with Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of North American i.e., North American and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between North American and Eidesvik Offshore

Assuming the 90 days horizon North American Construction is expected to generate 1.22 times more return on investment than Eidesvik Offshore. However, North American is 1.22 times more volatile than Eidesvik Offshore ASA. It trades about 0.03 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.11 per unit of risk. If you would invest  1,729  in North American Construction on September 2, 2024 and sell it today you would earn a total of  51.00  from holding North American Construction or generate 2.95% return on investment over 90 days.

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

North American Construction  vs.  Eidesvik Offshore ASA

North American Const

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, North American is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with North American and Eidesvik Offshore

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

The idea behind North American Construction and Eidesvik Offshore ASA 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.