Correlation Between Subsea 7 and Edda Wind

Can any of the company-specific risk be diversified away by investing in both Subsea 7 and Edda Wind 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 Subsea 7 and Edda Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Subsea 7 SA and Edda Wind ASA, you can compare the effects of market volatilities on Subsea 7 and Edda Wind 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 Subsea 7 with a short position of Edda Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Edda Wind.

Diversification Opportunities for Subsea 7 and Edda Wind

0.72

Correlation Coefficient

Subsea 7  Edda Wind

Poor diversification

The 3 months correlation between Subsea and Edda is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Edda Wind ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edda Wind ASA and Subsea 7 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 Subsea 7 SA are associated (or correlated) with Edda Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edda Wind ASA has no effect on the direction of Subsea 7 i.e., Subsea 7 and Edda Wind go up and down completely randomly.

Pair Corralation between Subsea 7 and Edda Wind

Assuming the 90 days trading horizon Subsea 7 SA is expected to generate 0.82 times more return on investment than Edda Wind. However, Subsea 7 SA is 1.22 times less risky than Edda Wind. It trades about -0.04 of its potential returns per unit of risk. Edda Wind ASA is currently generating about -0.07 per unit of risk. If you would invest  18,010  in Subsea 7 SA on December 30, 2024 and sell it today you would lose (1,080) from holding Subsea 7 SA or give up 6.0% of portfolio value over 90 days.

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

Subsea 7 SA  vs.  Edda Wind ASA

Subsea 7 SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Subsea 7 is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Edda Wind ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edda Wind ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Subsea 7 and Edda Wind

The main advantage of trading using opposite Subsea 7 and Edda Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 position performs unexpectedly, Edda Wind 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 Edda Wind will offset losses from the drop in Edda Wind's long position.

The idea behind Subsea 7 SA and Edda Wind 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.