Correlation Between Peninsula Energy and Solstad Offshore

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

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

Diversification Opportunities for Peninsula Energy and Solstad Offshore

-0.75

Correlation Coefficient

Peninsula Energy  Solstad Offshore

Pay attention - limited upside

The 3 months correlation between Peninsula and Solstad is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Peninsula Energy Limited and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Peninsula Energy 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 Peninsula Energy Limited are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Peninsula Energy i.e., Peninsula Energy and Solstad Offshore go up and down completely randomly.

Pair Corralation between Peninsula Energy and Solstad Offshore

Assuming the 90 days horizon Peninsula Energy Limited is expected to generate 2.49 times more return on investment than Solstad Offshore. However, Peninsula Energy is 2.49 times more volatile than Solstad Offshore ASA. It trades about 0.01 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.01 per unit of risk. If you would invest  120.00  in Peninsula Energy Limited on September 17, 2024 and sell it today you would lose (47.00) from holding Peninsula Energy Limited or give up 39.17% of portfolio value over 90 days.

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

Peninsula Energy Limited  vs.  Solstad Offshore ASA

Peninsula Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peninsula Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Solstad Offshore ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peninsula Energy and Solstad Offshore

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

The idea behind Peninsula Energy Limited and Solstad 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.