Correlation Between Solstad Offsho and Magnora ASA

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

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

Diversification Opportunities for Solstad Offsho and Magnora ASA

0.51

Correlation Coefficient

Solstad Offsho  Magnora ASA

Very weak diversification

The 3 months correlation between Solstad and Magnora is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offsho and Magnora ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnora ASA 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 Magnora ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnora ASA has no effect on the direction of Solstad Offsho i.e., Solstad Offsho and Magnora ASA go up and down completely randomly.

Pair Corralation between Solstad Offsho and Magnora ASA

Assuming the 90 days trading horizon Solstad Offsho is expected to generate 1.99 times more return on investment than Magnora ASA. However, Solstad Offsho is 1.99 times more volatile than Magnora ASA. It trades about 0.04 of its potential returns per unit of risk. Magnora ASA is currently generating about 0.04 per unit of risk. If you would invest  3,700  in Solstad Offsho on February 15, 2024 and sell it today you would earn a total of  1,192  from holding Solstad Offsho or generate 32.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Solstad Offsho  vs.  Magnora ASA

Solstad Offsho

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Solstad Offsho disclosed solid returns over the last few months and may actually be approaching a breakup point.

Magnora ASA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnora ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magnora ASA may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Solstad Offsho and Magnora ASA

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

The idea behind Solstad Offsho and Magnora 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.