Correlation Between Sabre Insurance and Odfjell Drilling

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

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

Diversification Opportunities for Sabre Insurance and Odfjell Drilling

-0.6

Correlation Coefficient

Sabre Insurance  Odfjell Drilling

Excellent diversification

The 3 months correlation between Sabre and Odfjell is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Sabre Insurance and Odfjell Drilling

Assuming the 90 days trading horizon Sabre Insurance Group is expected to under-perform the Odfjell Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Sabre Insurance Group is 1.15 times less risky than Odfjell Drilling. The stock trades about -0.16 of its potential returns per unit of risk. The Odfjell Drilling is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  6,210  in Odfjell Drilling on December 1, 2024 and sell it today you would lose (75.00) from holding Odfjell Drilling or give up 1.21% of portfolio value over 90 days.

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

Sabre Insurance Group  vs.  Odfjell Drilling

Sabre Insurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sabre Insurance 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Odfjell Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabre Insurance and Odfjell Drilling

The main advantage of trading using opposite Sabre Insurance and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.