Correlation Between Odfjell Drilling and Photocure

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

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

Diversification Opportunities for Odfjell Drilling and Photocure

0.45

Correlation Coefficient

Odfjell Drilling  Photocure

Very weak diversification

The 3 months correlation between Odfjell and Photocure is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Photocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photocure 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 Photocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photocure has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Photocure go up and down completely randomly.

Pair Corralation between Odfjell Drilling and Photocure

Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 1.06 times more return on investment than Photocure. However, Odfjell Drilling is 1.06 times more volatile than Photocure. It trades about 0.03 of its potential returns per unit of risk. Photocure is currently generating about -0.1 per unit of risk. If you would invest  5,105  in Odfjell Drilling on September 4, 2024 and sell it today you would earn a total of  45.00  from holding Odfjell Drilling or generate 0.88% return on investment over 90 days.

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

Odfjell Drilling  vs.  Photocure

Odfjell Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Photocure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Photocure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Odfjell Drilling and Photocure

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

The idea behind Odfjell Drilling and Photocure 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.