Correlation Between Solstad Offsho and Belships

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

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

Diversification Opportunities for Solstad Offsho and Belships

-0.31

Correlation Coefficient

Solstad Offsho  Belships

Very good diversification

The 3 months correlation between Solstad and Belships is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offsho and Belships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belships and Solstad Offsho 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 Solstad Offsho are associated (or correlated) with Belships. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belships has no effect on the direction of Solstad Offsho i.e., Solstad Offsho and Belships go up and down completely randomly.

Pair Corralation between Solstad Offsho and Belships

Assuming the 90 days trading horizon Solstad Offsho is expected to generate 1.44 times more return on investment than Belships. However, Solstad Offsho is 1.44 times more volatile than Belships. It trades about 0.07 of its potential returns per unit of risk. Belships is currently generating about -0.02 per unit of risk. If you would invest  3,449  in Solstad Offsho on September 13, 2024 and sell it today you would earn a total of  473.00  from holding Solstad Offsho or generate 13.71% return on investment over 90 days.

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

Solstad Offsho  vs.  Belships

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.

Belships

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Solstad Offsho and Belships

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

The idea behind Solstad Offsho and Belships 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.