Correlation Between Solstad Offshore and Cass Information

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

Diversification Opportunities for Solstad Offshore and Cass Information

-0.21

Correlation Coefficient

Solstad Offshore  Cass Information

Very good diversification

The 3 months correlation between Solstad and Cass is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems 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 Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Cass Information go up and down completely randomly.

Pair Corralation between Solstad Offshore and Cass Information

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to under-perform the Cass Information. In addition to that, Solstad Offshore is 1.22 times more volatile than Cass Information Systems. It trades about -0.03 of its total potential returns per unit of risk. Cass Information Systems is currently generating about 0.0 per unit of volatility. If you would invest  3,973  in Cass Information Systems on December 26, 2024 and sell it today you would lose (33.00) from holding Cass Information Systems or give up 0.83% of portfolio value over 90 days.

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

Solstad Offshore ASA  vs.  Cass Information Systems

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.

Cass Information Systems

Risk-Adjusted Performance

Weak

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

Pair Trading with Solstad Offshore and Cass Information

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

The idea behind Solstad Offshore ASA and Cass Information Systems 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.