Correlation Between Sunndal Sparebank and Odfjell Drilling

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

By analyzing existing cross correlation between Sunndal Sparebank and Odfjell Drilling, you can compare the effects of market volatilities on Sunndal Sparebank and Odfjell Drilling 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 Sunndal Sparebank with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunndal Sparebank and Odfjell Drilling.

Diversification Opportunities for Sunndal Sparebank and Odfjell Drilling

0.13

Correlation Coefficient

Sunndal Sparebank  Odfjell Drilling

Average diversification

The 3 months correlation between Sunndal and Odfjell is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sunndal Sparebank and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Sunndal Sparebank 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 Sunndal Sparebank are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Sunndal Sparebank i.e., Sunndal Sparebank and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Sunndal Sparebank and Odfjell Drilling

Assuming the 90 days trading horizon Sunndal Sparebank is expected to generate 4.17 times less return on investment than Odfjell Drilling. But when comparing it to its historical volatility, Sunndal Sparebank is 1.78 times less risky than Odfjell Drilling. It trades about 0.05 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,193  in Odfjell Drilling on October 11, 2024 and sell it today you would earn a total of  757.00  from holding Odfjell Drilling or generate 14.58% return on investment over 90 days.

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

Sunndal Sparebank  vs.  Odfjell Drilling

Sunndal Sparebank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunndal Sparebank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sunndal Sparebank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Odfjell Drilling

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Odfjell Drilling disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunndal Sparebank and Odfjell Drilling

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

The idea behind Sunndal Sparebank and Odfjell Drilling 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.