Correlation Between Dolphin Drilling and Techstep ASA

Can any of the company-specific risk be diversified away by investing in both Dolphin Drilling and Techstep ASA 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 Dolphin Drilling and Techstep ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dolphin Drilling AS and Techstep ASA, you can compare the effects of market volatilities on Dolphin Drilling and Techstep ASA 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 Dolphin Drilling with a short position of Techstep ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dolphin Drilling and Techstep ASA.

Diversification Opportunities for Dolphin Drilling and Techstep ASA

0.6

Correlation Coefficient

Dolphin Drilling  Techstep ASA

Poor diversification

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

Pair Corralation between Dolphin Drilling and Techstep ASA

Assuming the 90 days trading horizon Dolphin Drilling is expected to generate 1.34 times less return on investment than Techstep ASA. In addition to that, Dolphin Drilling is 1.15 times more volatile than Techstep ASA. It trades about 0.01 of its total potential returns per unit of risk. Techstep ASA is currently generating about 0.02 per unit of volatility. If you would invest  1,185  in Techstep ASA on September 12, 2024 and sell it today you would earn a total of  5.00  from holding Techstep ASA or generate 0.42% return on investment over 90 days.

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

Dolphin Drilling AS  vs.  Techstep ASA

Dolphin Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolphin Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dolphin Drilling is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Techstep ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Techstep ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Techstep ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dolphin Drilling and Techstep ASA

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

The idea behind Dolphin Drilling AS and Techstep 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.