Correlation Between Solstad Offshore and Advanced Micro

Can any of the company-specific risk be diversified away by investing in both Solstad Offshore and Advanced Micro 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 Advanced Micro 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 Advanced Micro Devices, you can compare the effects of market volatilities on Solstad Offshore and Advanced Micro 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 Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Advanced Micro.

Diversification Opportunities for Solstad Offshore and Advanced Micro

0.76

Correlation Coefficient

Solstad Offshore  Advanced Micro

Poor diversification

The 3 months correlation between Solstad and Advanced is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Advanced Micro go up and down completely randomly.

Pair Corralation between Solstad Offshore and Advanced Micro

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 0.72 times more return on investment than Advanced Micro. However, Solstad Offshore ASA is 1.4 times less risky than Advanced Micro. It trades about -0.03 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.06 per unit of risk. If you would invest  332.00  in Solstad Offshore ASA on December 24, 2024 and sell it today you would lose (14.00) from holding Solstad Offshore ASA or give up 4.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Solstad Offshore ASA  vs.  Advanced Micro Devices

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Solstad Offshore is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Advanced Micro Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Solstad Offshore and Advanced Micro

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

The idea behind Solstad Offshore ASA and Advanced Micro Devices 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.