Correlation Between REC Silicon and Solstad Offsho

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

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

Diversification Opportunities for REC Silicon and Solstad Offsho

-0.54

Correlation Coefficient

REC Silicon  Solstad Offsho

Excellent diversification

The 3 months correlation between REC and Solstad is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and Solstad Offsho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offsho and REC Silicon 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 REC Silicon ASA are associated (or correlated) with Solstad Offsho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offsho has no effect on the direction of REC Silicon i.e., REC Silicon and Solstad Offsho go up and down completely randomly.

Pair Corralation between REC Silicon and Solstad Offsho

Assuming the 90 days trading horizon REC Silicon ASA is expected to generate 1.2 times more return on investment than Solstad Offsho. However, REC Silicon is 1.2 times more volatile than Solstad Offsho. It trades about 0.27 of its potential returns per unit of risk. Solstad Offsho is currently generating about 0.18 per unit of risk. If you would invest  455.00  in REC Silicon ASA on September 17, 2024 and sell it today you would earn a total of  172.00  from holding REC Silicon ASA or generate 37.8% return on investment over 90 days.

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

REC Silicon ASA  vs.  Solstad Offsho

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Solstad Offsho

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Solstad Offsho disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REC Silicon and Solstad Offsho

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

The idea behind REC Silicon ASA and Solstad Offsho 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.