Correlation Between Clarkson PLC and Solstad Offshore

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

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

Diversification Opportunities for Clarkson PLC and Solstad Offshore

0.68

Correlation Coefficient

Clarkson PLC  Solstad Offshore

Poor diversification

The 3 months correlation between Clarkson and Solstad is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Clarkson PLC and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Clarkson PLC 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 Clarkson PLC are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Clarkson PLC i.e., Clarkson PLC and Solstad Offshore go up and down completely randomly.

Pair Corralation between Clarkson PLC and Solstad Offshore

Assuming the 90 days horizon Clarkson PLC is expected to generate 1.02 times less return on investment than Solstad Offshore. But when comparing it to its historical volatility, Clarkson PLC is 2.13 times less risky than Solstad Offshore. It trades about 0.04 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  283.00  in Solstad Offshore ASA on August 23, 2024 and sell it today you would lose (15.00) from holding Solstad Offshore ASA or give up 5.3% of portfolio value over 90 days.

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

Clarkson PLC  vs.  Solstad Offshore ASA

Clarkson PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarkson PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Clarkson PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Clarkson PLC and Solstad Offshore

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

The idea behind Clarkson PLC and Solstad 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.