Correlation Between Subsea 7 and Havila Shipping

Can any of the company-specific risk be diversified away by investing in both Subsea 7 and Havila Shipping 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 Havila Shipping 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 Havila Shipping ASA, you can compare the effects of market volatilities on Subsea 7 and Havila Shipping 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 Havila Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Havila Shipping.

Diversification Opportunities for Subsea 7 and Havila Shipping

0.07

Correlation Coefficient

Subsea 7  Havila Shipping

Significant diversification

The 3 months correlation between Subsea and Havila is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Havila Shipping ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Havila Shipping 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 Havila Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Havila Shipping ASA has no effect on the direction of Subsea 7 i.e., Subsea 7 and Havila Shipping go up and down completely randomly.

Pair Corralation between Subsea 7 and Havila Shipping

Assuming the 90 days trading horizon Subsea 7 SA is expected to generate 0.36 times more return on investment than Havila Shipping. However, Subsea 7 SA is 2.78 times less risky than Havila Shipping. It trades about 0.07 of its potential returns per unit of risk. Havila Shipping ASA is currently generating about -0.03 per unit of risk. If you would invest  9,871  in Subsea 7 SA on September 6, 2024 and sell it today you would earn a total of  8,019  from holding Subsea 7 SA or generate 81.24% return on investment over 90 days.

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

Subsea 7 SA  vs.  Havila Shipping ASA

Subsea 7 SA

Risk-Adjusted Performance

0 of 100

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.

Havila Shipping ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Havila Shipping ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Subsea 7 and Havila Shipping

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

The idea behind Subsea 7 SA and Havila Shipping 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.