Correlation Between Solstad Offsho and North Energy

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

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

Diversification Opportunities for Solstad Offsho and North Energy

0.27

Correlation Coefficient

Solstad Offsho  North Energy

Modest diversification

The 3 months correlation between Solstad and North is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offsho and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy 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 North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of Solstad Offsho i.e., Solstad Offsho and North Energy go up and down completely randomly.

Pair Corralation between Solstad Offsho and North Energy

Assuming the 90 days trading horizon Solstad Offsho is expected to generate 1.78 times more return on investment than North Energy. However, Solstad Offsho is 1.78 times more volatile than North Energy ASA. It trades about 0.03 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.04 per unit of risk. If you would invest  3,095  in Solstad Offsho on September 12, 2024 and sell it today you would earn a total of  821.00  from holding Solstad Offsho or generate 26.53% return on investment over 90 days.

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

Solstad Offsho  vs.  North Energy ASA

Solstad Offsho

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Solstad Offsho disclosed solid returns over the last few months and may actually be approaching a breakup point.

North Energy ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North Energy ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, North Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Solstad Offsho and North Energy

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

The idea behind Solstad Offsho and North Energy 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 CEOs Directory module to screen CEOs from public companies around the world.