Correlation Between Golden Ocean and Solstad Offsho

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

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

Diversification Opportunities for Golden Ocean and Solstad Offsho

0.86

Correlation Coefficient

Golden Ocean  Solstad Offsho

Very poor diversification

The 3 months correlation between Golden and Solstad is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and Solstad Offsho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offsho and Golden 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 Golden Ocean Group 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 Golden Ocean i.e., Golden Ocean and Solstad Offsho go up and down completely randomly.

Pair Corralation between Golden Ocean and Solstad Offsho

Assuming the 90 days trading horizon Golden Ocean Group is expected to under-perform the Solstad Offsho. But the stock apears to be less risky and, when comparing its historical volatility, Golden Ocean Group is 1.13 times less risky than Solstad Offsho. The stock trades about -0.29 of its potential returns per unit of risk. The Solstad Offsho is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  4,510  in Solstad Offsho on March 18, 2024 and sell it today you would lose (604.00) from holding Solstad Offsho or give up 13.39% of portfolio value over 90 days.

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

Golden Ocean Group  vs.  Solstad Offsho

Golden Ocean Group

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Ocean Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Golden Ocean is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Solstad Offsho

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offsho are ranked lower than 8 (%) 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.

Pair Trading with Golden Ocean and Solstad Offsho

The main advantage of trading using opposite Golden Ocean and Solstad Offsho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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 Golden Ocean Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.