Correlation Between Solstad Offshore and Flowers Foods

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

Diversification Opportunities for Solstad Offshore and Flowers Foods

0.6

Correlation Coefficient

Solstad Offshore  Flowers Foods

Poor diversification

The 3 months correlation between Solstad and Flowers is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers Foods 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 Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Flowers Foods go up and down completely randomly.

Pair Corralation between Solstad Offshore and Flowers Foods

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 2.95 times more return on investment than Flowers Foods. However, Solstad Offshore is 2.95 times more volatile than Flowers Foods. It trades about 0.07 of its potential returns per unit of risk. Flowers Foods is currently generating about -0.02 per unit of risk. If you would invest  284.00  in Solstad Offshore ASA on September 16, 2024 and sell it today you would earn a total of  40.00  from holding Solstad Offshore ASA or generate 14.08% return on investment over 90 days.

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

Solstad Offshore ASA  vs.  Flowers Foods

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.

Flowers Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Solstad Offshore and Flowers Foods

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

The idea behind Solstad Offshore ASA and Flowers Foods 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.