Correlation Between United Insurance and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both United Insurance and NorAm Drilling 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 United Insurance and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Insurance Holdings and NorAm Drilling AS, you can compare the effects of market volatilities on United Insurance and NorAm Drilling 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 United Insurance with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and NorAm Drilling.
Diversification Opportunities for United Insurance and NorAm Drilling
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and NorAm is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS and United Insurance 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 United Insurance Holdings are associated (or correlated) with NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of United Insurance i.e., United Insurance and NorAm Drilling go up and down completely randomly.
Pair Corralation between United Insurance and NorAm Drilling
Assuming the 90 days horizon United Insurance is expected to generate 80.88 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, United Insurance Holdings is 2.01 times less risky than NorAm Drilling. It trades about 0.01 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 220.00 in NorAm Drilling AS on October 21, 2024 and sell it today you would earn a total of 84.00 from holding NorAm Drilling AS or generate 38.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Insurance Holdings vs. NorAm Drilling AS
Performance |
| Timeline |
| United Insurance Holdings |
| NorAm Drilling AS |
United Insurance and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Insurance and NorAm Drilling
The main advantage of trading using opposite United Insurance and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Insurance position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| United Insurance vs. HEALTHSTREAM | United Insurance vs. FEMALE HEALTH | United Insurance vs. NTT DATA | United Insurance vs. Cass Information Systems |
| NorAm Drilling vs. Preferred Bank | NorAm Drilling vs. CHIBA BANK | NorAm Drilling vs. Cincinnati Financial Corp | NorAm Drilling vs. United Insurance Holdings |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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