Correlation Between Stolt Nielsen and DnB ASA

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

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

Diversification Opportunities for Stolt Nielsen and DnB ASA

-0.87

Correlation Coefficient

Stolt Nielsen  DnB ASA

Pay attention - limited upside

The 3 months correlation between Stolt and DnB is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and DnB ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DnB ASA and Stolt Nielsen 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 Stolt Nielsen Limited are associated (or correlated) with DnB ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DnB ASA has no effect on the direction of Stolt Nielsen i.e., Stolt Nielsen and DnB ASA go up and down completely randomly.

Pair Corralation between Stolt Nielsen and DnB ASA

Assuming the 90 days trading horizon Stolt Nielsen Limited is expected to under-perform the DnB ASA. In addition to that, Stolt Nielsen is 2.66 times more volatile than DnB ASA. It trades about -0.1 of its total potential returns per unit of risk. DnB ASA is currently generating about -0.15 per unit of volatility. If you would invest  23,050  in DnB ASA on September 23, 2024 and sell it today you would lose (630.00) from holding DnB ASA or give up 2.73% of portfolio value over 90 days.

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

Stolt Nielsen Limited  vs.  DnB ASA

Stolt Nielsen Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

DnB ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DnB ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, DnB 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 Stolt Nielsen and DnB ASA

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

The idea behind Stolt Nielsen Limited and DnB 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.