Correlation Between Solstad Offsho and Kitron ASA

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

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

Diversification Opportunities for Solstad Offsho and Kitron ASA

-0.42

Correlation Coefficient

Solstad Offsho  Kitron ASA

Very good diversification

The 3 months correlation between Solstad and Kitron is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offsho and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron ASA and Solstad Offsho 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 Offsho are associated (or correlated) with Kitron ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kitron ASA has no effect on the direction of Solstad Offsho i.e., Solstad Offsho and Kitron ASA go up and down completely randomly.

Pair Corralation between Solstad Offsho and Kitron ASA

Assuming the 90 days trading horizon Solstad Offsho is expected to under-perform the Kitron ASA. But the stock apears to be less risky and, when comparing its historical volatility, Solstad Offsho is 1.07 times less risky than Kitron ASA. The stock trades about -0.1 of its potential returns per unit of risk. The Kitron ASA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,258  in Kitron ASA on December 4, 2024 and sell it today you would earn a total of  1,094  from holding Kitron ASA or generate 33.58% return on investment over 90 days.

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

Solstad Offsho  vs.  Kitron ASA

Solstad Offsho

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offsho 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 essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kitron ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solstad Offsho and Kitron ASA

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

The idea behind Solstad Offsho and Kitron ASA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.