Correlation Between Solstad Offshore and Aris Water

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

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

Diversification Opportunities for Solstad Offshore and Aris Water

0.0

Correlation Coefficient

Solstad Offshore  Aris Water

Pay attention - limited upside

The 3 months correlation between Solstad and Aris is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Aris Water Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Water Solutions and Solstad Offshore 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 Solstad Offshore ASA are associated (or correlated) with Aris Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Water Solutions has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Aris Water go up and down completely randomly.

Pair Corralation between Solstad Offshore and Aris Water

Assuming the 90 days horizon Solstad Offshore ASA is expected to generate 1.31 times more return on investment than Aris Water. However, Solstad Offshore is 1.31 times more volatile than Aris Water Solutions. It trades about 0.04 of its potential returns per unit of risk. Aris Water Solutions is currently generating about 0.05 per unit of risk. If you would invest  151.00  in Solstad Offshore ASA on October 10, 2024 and sell it today you would earn a total of  158.00  from holding Solstad Offshore ASA or generate 104.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Solstad Offshore ASA  vs.  Aris Water Solutions

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solstad Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aris Water Solutions

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Solstad Offshore and Aris Water

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

The idea behind Solstad Offshore ASA and Aris Water Solutions 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.