Correlation Between OtelloASA and Werner Enterprises

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

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

Diversification Opportunities for OtelloASA and Werner Enterprises

-0.4

Correlation Coefficient

OtelloASA  Werner Enterprises

Very good diversification

The 3 months correlation between OtelloASA and Werner is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Otello ASA and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises and OtelloASA 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 Otello ASA are associated (or correlated) with Werner Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Werner Enterprises has no effect on the direction of OtelloASA i.e., OtelloASA and Werner Enterprises go up and down completely randomly.

Pair Corralation between OtelloASA and Werner Enterprises

Assuming the 90 days horizon Otello ASA is expected to under-perform the Werner Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Otello ASA is 1.04 times less risky than Werner Enterprises. The stock trades about -0.04 of its potential returns per unit of risk. The Werner Enterprises is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,266  in Werner Enterprises on September 13, 2024 and sell it today you would earn a total of  454.00  from holding Werner Enterprises or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Otello ASA  vs.  Werner Enterprises

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Werner Enterprises

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Werner Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OtelloASA and Werner Enterprises

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

The idea behind Otello ASA and Werner Enterprises 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.