Correlation Between Odfjell Drilling and Gear4music Plc

Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling and Gear4music Plc 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 Gear4music Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Odfjell Drilling and Gear4music Plc, you can compare the effects of market volatilities on Odfjell Drilling and Gear4music Plc 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 Gear4music Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and Gear4music Plc.

Diversification Opportunities for Odfjell Drilling and Gear4music Plc

0.82

Correlation Coefficient

Odfjell Drilling  Gear4music Plc

Very poor diversification

The 3 months correlation between Odfjell and Gear4music is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and Gear4music Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear4music Plc 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 Gear4music Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear4music Plc has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and Gear4music Plc go up and down completely randomly.

Pair Corralation between Odfjell Drilling and Gear4music Plc

Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 1.58 times less return on investment than Gear4music Plc. But when comparing it to its historical volatility, Odfjell Drilling is 2.62 times less risky than Gear4music Plc. It trades about 0.37 of its potential returns per unit of risk. Gear4music Plc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  13,500  in Gear4music Plc on April 25, 2025 and sell it today you would earn a total of  8,900  from holding Gear4music Plc or generate 65.93% return on investment over 90 days.

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

Odfjell Drilling  vs.  Gear4music Plc

Odfjell Drilling

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Odfjell Drilling are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Odfjell Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gear4music Plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gear4music Plc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Gear4music Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Odfjell Drilling and Gear4music Plc

The main advantage of trading using opposite Odfjell Drilling and Gear4music Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling position performs unexpectedly, Gear4music Plc 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 Gear4music Plc will offset losses from the drop in Gear4music Plc's long position.

The idea behind Odfjell Drilling and Gear4music Plc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.