Correlation Between Odfjell Drilling and Aqua Bio

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

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

Diversification Opportunities for Odfjell Drilling and Aqua Bio

0.02

Correlation Coefficient

Odfjell Drilling  Aqua Bio

Significant diversification

The 3 months correlation between Odfjell and Aqua is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Aqua Bio Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Bio Technology and Odfjell Drilling 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 Odfjell Drilling are associated (or correlated) with Aqua Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Bio Technology has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Aqua Bio go up and down completely randomly.

Pair Corralation between Odfjell Drilling and Aqua Bio

Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.67 times more return on investment than Aqua Bio. However, Odfjell Drilling is 1.48 times less risky than Aqua Bio. It trades about 0.19 of its potential returns per unit of risk. Aqua Bio Technology is currently generating about -0.13 per unit of risk. If you would invest  5,052  in Odfjell Drilling on March 7, 2024 and sell it today you would earn a total of  468.00  from holding Odfjell Drilling or generate 9.26% return on investment over 90 days.

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

Odfjell Drilling  vs.  Aqua Bio Technology

Odfjell Drilling

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Odfjell Drilling disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aqua Bio Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Odfjell Drilling and Aqua Bio

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

The idea behind Odfjell Drilling and Aqua Bio Technology 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.