Correlation Between NIPPON STEEL and Eidesvik Offshore

Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and Eidesvik Offshore 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 NIPPON STEEL and Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIPPON STEEL SPADR and Eidesvik Offshore ASA, you can compare the effects of market volatilities on NIPPON STEEL and Eidesvik Offshore 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 NIPPON STEEL with a short position of Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and Eidesvik Offshore.

Diversification Opportunities for NIPPON STEEL and Eidesvik Offshore

0.59

Correlation Coefficient

NIPPON STEEL  Eidesvik Offshore

Very weak diversification

The 3 months correlation between NIPPON and Eidesvik is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA and NIPPON STEEL 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 NIPPON STEEL SPADR are associated (or correlated) with Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between NIPPON STEEL and Eidesvik Offshore

Assuming the 90 days trading horizon NIPPON STEEL is expected to generate 1.51 times less return on investment than Eidesvik Offshore. But when comparing it to its historical volatility, NIPPON STEEL SPADR is 1.08 times less risky than Eidesvik Offshore. It trades about 0.03 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Eidesvik Offshore ASA on September 29, 2024 and sell it today you would earn a total of  43.00  from holding Eidesvik Offshore ASA or generate 63.24% return on investment over 90 days.

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

NIPPON STEEL SPADR  vs.  Eidesvik Offshore ASA

NIPPON STEEL SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NIPPON STEEL and Eidesvik Offshore

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

The idea behind NIPPON STEEL SPADR and Eidesvik Offshore 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.