Correlation Between TGS NOPEC and Edda Wind

Can any of the company-specific risk be diversified away by investing in both TGS NOPEC and Edda Wind 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 TGS NOPEC and Edda Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TGS NOPEC Geophysical and Edda Wind ASA, you can compare the effects of market volatilities on TGS NOPEC and Edda Wind 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 TGS NOPEC with a short position of Edda Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of TGS NOPEC and Edda Wind.

Diversification Opportunities for TGS NOPEC and Edda Wind

0.71

Correlation Coefficient

TGS NOPEC  Edda Wind

Poor diversification

The 3 months correlation between TGS and Edda is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding TGS NOPEC Geophysical and Edda Wind ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edda Wind ASA and TGS NOPEC 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 TGS NOPEC Geophysical are associated (or correlated) with Edda Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edda Wind ASA has no effect on the direction of TGS NOPEC i.e., TGS NOPEC and Edda Wind go up and down completely randomly.

Pair Corralation between TGS NOPEC and Edda Wind

Assuming the 90 days trading horizon TGS NOPEC Geophysical is expected to generate 0.96 times more return on investment than Edda Wind. However, TGS NOPEC Geophysical is 1.04 times less risky than Edda Wind. It trades about -0.07 of its potential returns per unit of risk. Edda Wind ASA is currently generating about -0.07 per unit of risk. If you would invest  11,160  in TGS NOPEC Geophysical on December 29, 2024 and sell it today you would lose (1,110) from holding TGS NOPEC Geophysical or give up 9.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

TGS NOPEC Geophysical  vs.  Edda Wind ASA

TGS NOPEC Geophysical

Risk-Adjusted Performance

Very Weak

Over the last 90 days TGS NOPEC Geophysical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Edda Wind ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edda Wind ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with TGS NOPEC and Edda Wind

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

The idea behind TGS NOPEC Geophysical and Edda Wind ASA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.