Correlation Between Deep Value and Solstad Offsho

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

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

Diversification Opportunities for Deep Value and Solstad Offsho

0.66

Correlation Coefficient

Deep Value  Solstad Offsho

Poor diversification

The 3 months correlation between Deep and Solstad is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Solstad Offsho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offsho and Deep Value 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 Deep Value Driller are associated (or correlated) with Solstad Offsho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offsho has no effect on the direction of Deep Value i.e., Deep Value and Solstad Offsho go up and down completely randomly.

Pair Corralation between Deep Value and Solstad Offsho

Assuming the 90 days trading horizon Deep Value is expected to generate 1.69 times less return on investment than Solstad Offsho. But when comparing it to its historical volatility, Deep Value Driller is 1.06 times less risky than Solstad Offsho. It trades about 0.19 of its potential returns per unit of risk. Solstad Offsho is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,728  in Solstad Offsho on April 24, 2025 and sell it today you would earn a total of  1,392  from holding Solstad Offsho or generate 37.34% return on investment over 90 days.

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

Deep Value Driller  vs.  Solstad Offsho

Deep Value Driller

Risk-Adjusted Performance

Good

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

Solstad Offsho

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Solstad Offsho disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deep Value and Solstad Offsho

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

The idea behind Deep Value Driller and Solstad Offsho 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.