Correlation Between Skue Sparebank and Odfjell Technology

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

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

Diversification Opportunities for Skue Sparebank and Odfjell Technology

0.32

Correlation Coefficient

Skue Sparebank  Odfjell Technology

Weak diversification

The 3 months correlation between Skue and Odfjell is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Skue Sparebank and Odfjell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Technology and Skue Sparebank 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 Skue Sparebank are associated (or correlated) with Odfjell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Technology has no effect on the direction of Skue Sparebank i.e., Skue Sparebank and Odfjell Technology go up and down completely randomly.

Pair Corralation between Skue Sparebank and Odfjell Technology

Assuming the 90 days trading horizon Skue Sparebank is expected to generate 0.48 times more return on investment than Odfjell Technology. However, Skue Sparebank is 2.08 times less risky than Odfjell Technology. It trades about 0.45 of its potential returns per unit of risk. Odfjell Technology is currently generating about 0.03 per unit of risk. If you would invest  25,900  in Skue Sparebank on November 29, 2024 and sell it today you would earn a total of  8,805  from holding Skue Sparebank or generate 34.0% return on investment over 90 days.

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

Skue Sparebank  vs.  Odfjell Technology

Skue Sparebank

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Skue Sparebank are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Skue Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Odfjell Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Odfjell Technology is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Skue Sparebank and Odfjell Technology

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

The idea behind Skue Sparebank and Odfjell Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.