Correlation Between Aker Carbon and Eidesvik Offshore

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

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

Diversification Opportunities for Aker Carbon and Eidesvik Offshore

-0.21

Correlation Coefficient

Aker Carbon  Eidesvik Offshore

Very good diversification

The 3 months correlation between Aker and Eidesvik is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture 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 Aker Carbon 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 Aker Carbon Capture 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 Aker Carbon i.e., Aker Carbon and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between Aker Carbon and Eidesvik Offshore

Assuming the 90 days trading horizon Aker Carbon is expected to generate 1.15 times less return on investment than Eidesvik Offshore. In addition to that, Aker Carbon is 1.8 times more volatile than Eidesvik Offshore ASA. It trades about 0.14 of its total potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about 0.29 per unit of volatility. If you would invest  1,590  in Eidesvik Offshore ASA on March 1, 2024 and sell it today you would earn a total of  108.00  from holding Eidesvik Offshore ASA or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Aker Carbon Capture  vs.  Eidesvik Offshore ASA

Aker Carbon Capture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aker Carbon Capture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Aker Carbon is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eidesvik Offshore ASA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eidesvik Offshore ASA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Eidesvik Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aker Carbon and Eidesvik Offshore

The main advantage of trading using opposite Aker Carbon and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Carbon 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 Aker Carbon Capture 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.