Correlation Between Yara International and Tidewater

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

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

Diversification Opportunities for Yara International and Tidewater

-0.67

Correlation Coefficient

Yara International  Tidewater

Excellent diversification

The 3 months correlation between Yara and Tidewater is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Tidewater in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater and Yara International 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 Yara International ASA are associated (or correlated) with Tidewater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater has no effect on the direction of Yara International i.e., Yara International and Tidewater go up and down completely randomly.

Pair Corralation between Yara International and Tidewater

Assuming the 90 days horizon Yara International ASA is expected to under-perform the Tidewater. But the pink sheet apears to be less risky and, when comparing its historical volatility, Yara International ASA is 1.29 times less risky than Tidewater. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Tidewater is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,105  in Tidewater on January 26, 2024 and sell it today you would earn a total of  162.00  from holding Tidewater or generate 1.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Yara International ASA  vs.  Tidewater

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Tidewater

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tidewater are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Tidewater showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yara International and Tidewater

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

The idea behind Yara International ASA and Tidewater 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.