Correlation Between Solstad Offshore and Motorcar Parts

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

By analyzing existing cross correlation between Solstad Offshore ASA and Motorcar Parts of, you can compare the effects of market volatilities on Solstad Offshore and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Motorcar Parts.

Diversification Opportunities for Solstad Offshore and Motorcar Parts

0.72

Correlation Coefficient

Solstad Offshore  Motorcar Parts

Poor diversification

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

Pair Corralation between Solstad Offshore and Motorcar Parts

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 0.94 times more return on investment than Motorcar Parts. However, Solstad Offshore ASA is 1.06 times less risky than Motorcar Parts. It trades about 0.02 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.01 per unit of risk. If you would invest  339.00  in Solstad Offshore ASA on September 18, 2024 and sell it today you would lose (19.00) from holding Solstad Offshore ASA or give up 5.6% of portfolio value over 90 days.

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

Solstad Offshore ASA  vs.  Motorcar Parts of

Solstad Offshore ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Motorcar Parts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Motorcar Parts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solstad Offshore and Motorcar Parts

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

The idea behind Solstad Offshore ASA and Motorcar Parts of 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.