Correlation Between Integrated Wind and Odfjell Drilling

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

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

Diversification Opportunities for Integrated Wind and Odfjell Drilling

-0.02

Correlation Coefficient

Integrated Wind  Odfjell Drilling

Good diversification

The 3 months correlation between Integrated and Odfjell is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Wind Solutions and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Integrated Wind 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 Integrated Wind Solutions are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Integrated Wind i.e., Integrated Wind and Odfjell Drilling go up and down completely randomly.

Pair Corralation between Integrated Wind and Odfjell Drilling

Assuming the 90 days trading horizon Integrated Wind is expected to generate 1.73 times less return on investment than Odfjell Drilling. In addition to that, Integrated Wind is 1.65 times more volatile than Odfjell Drilling. It trades about 0.02 of its total potential returns per unit of risk. Odfjell Drilling is currently generating about 0.06 per unit of volatility. If you would invest  3,852  in Odfjell Drilling on September 13, 2024 and sell it today you would earn a total of  1,218  from holding Odfjell Drilling or generate 31.62% return on investment over 90 days.

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

Integrated Wind Solutions  vs.  Odfjell Drilling

Integrated Wind Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Wind Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Integrated Wind is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Odfjell Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odfjell Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Odfjell Drilling is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Integrated Wind and Odfjell Drilling

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

The idea behind Integrated Wind Solutions and Odfjell Drilling 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.