Correlation Between Solstad Offshore and Republic Services

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

Diversification Opportunities for Solstad Offshore and Republic Services

-0.56

Correlation Coefficient

Solstad Offshore  Republic Services

Excellent diversification

The 3 months correlation between Solstad and Republic is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Republic Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Services 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 Republic Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Republic Services has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Republic Services go up and down completely randomly.

Pair Corralation between Solstad Offshore and Republic Services

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to under-perform the Republic Services. In addition to that, Solstad Offshore is 1.42 times more volatile than Republic Services. It trades about -0.02 of its total potential returns per unit of risk. Republic Services is currently generating about 0.18 per unit of volatility. If you would invest  19,367  in Republic Services on December 30, 2024 and sell it today you would earn a total of  2,983  from holding Republic Services or generate 15.4% return on investment over 90 days.

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

Solstad Offshore ASA  vs.  Republic Services

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.

Republic Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Republic Services reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solstad Offshore and Republic Services

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

The idea behind Solstad Offshore ASA and Republic Services 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 Global Correlations module to find global opportunities by holding instruments from different markets.