Correlation Between Northern Ocean and Deep Value

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

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

Diversification Opportunities for Northern Ocean and Deep Value

0.01

Correlation Coefficient

Northern Ocean  Deep Value

Significant diversification

The 3 months correlation between Northern and Deep is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Northern Ocean and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller and Northern Ocean 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 Northern Ocean are associated (or correlated) with Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Northern Ocean i.e., Northern Ocean and Deep Value go up and down completely randomly.

Pair Corralation between Northern Ocean and Deep Value

Assuming the 90 days trading horizon Northern Ocean is expected to generate 4.71 times less return on investment than Deep Value. In addition to that, Northern Ocean is 1.59 times more volatile than Deep Value Driller. It trades about 0.02 of its total potential returns per unit of risk. Deep Value Driller is currently generating about 0.19 per unit of volatility. If you would invest  1,360  in Deep Value Driller on April 24, 2025 and sell it today you would earn a total of  276.00  from holding Deep Value Driller or generate 20.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Northern Ocean  vs.  Deep Value Driller

Northern Ocean

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Ocean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Northern Ocean is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Northern Ocean and Deep Value

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

The idea behind Northern Ocean and Deep Value Driller 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.