Correlation Between Solstad Offsho and Napatech

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

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

Diversification Opportunities for Solstad Offsho and Napatech

0.51

Correlation Coefficient

Solstad Offsho  Napatech

Very weak diversification

The 3 months correlation between Solstad and Napatech is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offsho and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS 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 Napatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Napatech AS has no effect on the direction of Solstad Offsho i.e., Solstad Offsho and Napatech go up and down completely randomly.

Pair Corralation between Solstad Offsho and Napatech

Assuming the 90 days trading horizon Solstad Offsho is expected to under-perform the Napatech. But the stock apears to be less risky and, when comparing its historical volatility, Solstad Offsho is 1.73 times less risky than Napatech. The stock trades about -0.09 of its potential returns per unit of risk. The Napatech AS is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,220  in Napatech AS on December 2, 2024 and sell it today you would lose (170.00) from holding Napatech AS or give up 7.66% of portfolio value over 90 days.

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

Solstad Offsho  vs.  Napatech AS

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 latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Napatech AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Napatech 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 Solstad Offsho and Napatech

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

The idea behind Solstad Offsho and Napatech AS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.