Correlation Between Shelf Drilling and Prosafe SE

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

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

Diversification Opportunities for Shelf Drilling and Prosafe SE

-0.57

Correlation Coefficient

Shelf Drilling  Prosafe SE

Excellent diversification

The 3 months correlation between Shelf and Prosafe is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shelf Drilling and Prosafe SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosafe SE and Shelf 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 Shelf Drilling are associated (or correlated) with Prosafe SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosafe SE has no effect on the direction of Shelf Drilling i.e., Shelf Drilling and Prosafe SE go up and down completely randomly.

Pair Corralation between Shelf Drilling and Prosafe SE

Assuming the 90 days trading horizon Shelf Drilling is expected to generate 0.73 times more return on investment than Prosafe SE. However, Shelf Drilling is 1.38 times less risky than Prosafe SE. It trades about -0.02 of its potential returns per unit of risk. Prosafe SE is currently generating about -0.4 per unit of risk. If you would invest  2,360  in Shelf Drilling on August 31, 2024 and sell it today you would lose (260.00) from holding Shelf Drilling or give up 11.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Shelf Drilling  vs.  Prosafe SE

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prosafe SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosafe SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Shelf Drilling and Prosafe SE

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

The idea behind Shelf Drilling and Prosafe SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.