Correlation Between Solstad Offshore and CVS Health

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

Diversification Opportunities for Solstad Offshore and CVS Health

-0.26

Correlation Coefficient

Solstad Offshore  CVS Health

Very good diversification

The 3 months correlation between Solstad and CVS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and CVS Health go up and down completely randomly.

Pair Corralation between Solstad Offshore and CVS Health

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 1.83 times more return on investment than CVS Health. However, Solstad Offshore is 1.83 times more volatile than CVS Health. It trades about 0.02 of its potential returns per unit of risk. CVS Health is currently generating about -0.03 per unit of risk. If you would invest  306.00  in Solstad Offshore ASA on October 5, 2024 and sell it today you would earn a total of  24.00  from holding Solstad Offshore ASA or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Solstad Offshore ASA  vs.  CVS Health

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Modest

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 uncertain basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Solstad Offshore and CVS Health

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

The idea behind Solstad Offshore ASA and CVS Health 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.