Correlation Between Odfjell Drilling and Ocean GeoLoop

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

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

Diversification Opportunities for Odfjell Drilling and Ocean GeoLoop

0.02

Correlation Coefficient

Odfjell Drilling  Ocean GeoLoop

Significant diversification

The 3 months correlation between Odfjell and Ocean is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Ocean GeoLoop AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean GeoLoop AS and Odfjell Drilling 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 Odfjell Drilling are associated (or correlated) with Ocean GeoLoop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean GeoLoop AS has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Ocean GeoLoop go up and down completely randomly.

Pair Corralation between Odfjell Drilling and Ocean GeoLoop

Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 1.18 times less return on investment than Ocean GeoLoop. But when comparing it to its historical volatility, Odfjell Drilling is 5.14 times less risky than Ocean GeoLoop. It trades about 0.24 of its potential returns per unit of risk. Ocean GeoLoop AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  390.00  in Ocean GeoLoop AS on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Ocean GeoLoop AS or generate 0.0% return on investment over 90 days.

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

Odfjell Drilling  vs.  Ocean GeoLoop AS

Odfjell Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 7 (%) 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.

Ocean GeoLoop AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean GeoLoop AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Odfjell Drilling and Ocean GeoLoop

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

The idea behind Odfjell Drilling and Ocean GeoLoop AS 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.