Correlation Between SOLSTAD OFFSHORE and CAIRN HOMES

Can any of the company-specific risk be diversified away by investing in both SOLSTAD OFFSHORE and CAIRN HOMES 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 OFFSHORE and CAIRN HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOLSTAD OFFSHORE NK and CAIRN HOMES EO, you can compare the effects of market volatilities on SOLSTAD OFFSHORE and CAIRN HOMES 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 OFFSHORE with a short position of CAIRN HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOLSTAD OFFSHORE and CAIRN HOMES.

Diversification Opportunities for SOLSTAD OFFSHORE and CAIRN HOMES

0.49

Correlation Coefficient

SOLSTAD OFFSHORE  CAIRN HOMES

Very weak diversification

The 3 months correlation between SOLSTAD and CAIRN is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SOLSTAD OFFSHORE NK and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO and SOLSTAD OFFSHORE 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 OFFSHORE NK are associated (or correlated) with CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of SOLSTAD OFFSHORE i.e., SOLSTAD OFFSHORE and CAIRN HOMES go up and down completely randomly.

Pair Corralation between SOLSTAD OFFSHORE and CAIRN HOMES

Assuming the 90 days horizon SOLSTAD OFFSHORE NK is expected to generate 0.97 times more return on investment than CAIRN HOMES. However, SOLSTAD OFFSHORE NK is 1.03 times less risky than CAIRN HOMES. It trades about -0.03 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about -0.06 per unit of risk. If you would invest  337.00  in SOLSTAD OFFSHORE NK on December 21, 2024 and sell it today you would lose (16.00) from holding SOLSTAD OFFSHORE NK or give up 4.75% of portfolio value over 90 days.

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

SOLSTAD OFFSHORE NK  vs.  CAIRN HOMES EO

SOLSTAD OFFSHORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOLSTAD OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SOLSTAD OFFSHORE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CAIRN HOMES EO

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAIRN HOMES EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SOLSTAD OFFSHORE and CAIRN HOMES

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

The idea behind SOLSTAD OFFSHORE NK and CAIRN HOMES EO 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.