Correlation Between Pressure Technologies and Odfjell Drilling

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

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

Diversification Opportunities for Pressure Technologies and Odfjell Drilling

0.39

Correlation Coefficient

Pressure Technologies  Odfjell Drilling

Weak diversification

The 3 months correlation between Pressure and Odfjell is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pressure Technologies Plc and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Pressure Technologies 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 Pressure Technologies Plc are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Pressure Technologies i.e., Pressure Technologies and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Pressure Technologies and Odfjell Drilling

Assuming the 90 days trading horizon Pressure Technologies is expected to generate 43.74 times less return on investment than Odfjell Drilling. But when comparing it to its historical volatility, Pressure Technologies Plc is 1.58 times less risky than Odfjell Drilling. It trades about 0.01 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,040  in Odfjell Drilling on October 25, 2024 and sell it today you would earn a total of  980.00  from holding Odfjell Drilling or generate 19.44% return on investment over 90 days.

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

Pressure Technologies Plc  vs.  Odfjell Drilling

Pressure Technologies Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pressure Technologies Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pressure Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Odfjell Drilling

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Odfjell Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pressure Technologies and Odfjell Drilling

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

The idea behind Pressure Technologies Plc and Odfjell Drilling 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.