Correlation Between Stolt Nielsen and Sparebanken Ost

Can any of the company-specific risk be diversified away by investing in both Stolt Nielsen and Sparebanken Ost 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 Stolt Nielsen and Sparebanken Ost into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stolt Nielsen Limited and Sparebanken Ost, you can compare the effects of market volatilities on Stolt Nielsen and Sparebanken Ost 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 Stolt Nielsen with a short position of Sparebanken Ost. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stolt Nielsen and Sparebanken Ost.

Diversification Opportunities for Stolt Nielsen and Sparebanken Ost

-0.86

Correlation Coefficient

Stolt Nielsen  Sparebanken Ost

Pay attention - limited upside

The 3 months correlation between Stolt and Sparebanken is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost and Stolt Nielsen 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 Stolt Nielsen Limited are associated (or correlated) with Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Stolt Nielsen i.e., Stolt Nielsen and Sparebanken Ost go up and down completely randomly.

Pair Corralation between Stolt Nielsen and Sparebanken Ost

Assuming the 90 days trading horizon Stolt Nielsen is expected to generate 3.37 times less return on investment than Sparebanken Ost. In addition to that, Stolt Nielsen is 1.96 times more volatile than Sparebanken Ost. It trades about 0.04 of its total potential returns per unit of risk. Sparebanken Ost is currently generating about 0.24 per unit of volatility. If you would invest  6,699  in Sparebanken Ost on October 9, 2024 and sell it today you would earn a total of  351.00  from holding Sparebanken Ost or generate 5.24% return on investment over 90 days.

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

Stolt Nielsen Limited  vs.  Sparebanken Ost

Stolt Nielsen Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sparebanken Ost

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stolt Nielsen and Sparebanken Ost

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

The idea behind Stolt Nielsen Limited and Sparebanken Ost 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.