Correlation Between Sparebanken Ost and Eidesvik Offshore

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

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

Diversification Opportunities for Sparebanken Ost and Eidesvik Offshore

-0.1

Correlation Coefficient

Sparebanken Ost  Eidesvik Offshore

Good diversification

The 3 months correlation between Sparebanken and Eidesvik is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sparebanken Ost and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA and Sparebanken Ost 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 Sparebanken Ost are associated (or correlated) with Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of Sparebanken Ost i.e., Sparebanken Ost and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between Sparebanken Ost and Eidesvik Offshore

Assuming the 90 days trading horizon Sparebanken Ost is expected to generate 0.79 times more return on investment than Eidesvik Offshore. However, Sparebanken Ost is 1.27 times less risky than Eidesvik Offshore. It trades about 0.22 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.03 per unit of risk. If you would invest  6,510  in Sparebanken Ost on November 29, 2024 and sell it today you would earn a total of  1,290  from holding Sparebanken Ost or generate 19.82% return on investment over 90 days.

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

Sparebanken Ost  vs.  Eidesvik Offshore ASA

Sparebanken Ost

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 17 (%) 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.

Eidesvik Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Eidesvik Offshore 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 Sparebanken Ost and Eidesvik Offshore

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

The idea behind Sparebanken Ost and Eidesvik Offshore 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.