Correlation Between Nidaros Sparebank and Odfjell Technology

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

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

Diversification Opportunities for Nidaros Sparebank and Odfjell Technology

0.55

Correlation Coefficient

Nidaros Sparebank  Odfjell Technology

Very weak diversification

The 3 months correlation between Nidaros and Odfjell is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nidaros Sparebank and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology and Nidaros 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 Nidaros Sparebank are associated (or correlated) with Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of Nidaros Sparebank i.e., Nidaros Sparebank and Odfjell Technology go up and down completely randomly.

Pair Corralation between Nidaros Sparebank and Odfjell Technology

Assuming the 90 days trading horizon Nidaros Sparebank is expected to generate 0.6 times more return on investment than Odfjell Technology. However, Nidaros Sparebank is 1.68 times less risky than Odfjell Technology. It trades about 0.08 of its potential returns per unit of risk. Odfjell Technology is currently generating about 0.03 per unit of risk. If you would invest  10,180  in Nidaros Sparebank on October 12, 2024 and sell it today you would earn a total of  220.00  from holding Nidaros Sparebank or generate 2.16% return on investment over 90 days.

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

Nidaros Sparebank  vs.  Odfjell Technology

Nidaros Sparebank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Odfjell Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nidaros Sparebank and Odfjell Technology

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

The idea behind Nidaros Sparebank and Odfjell Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.