Correlation Between Gladstone Investment and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Gladstone Investment 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 Gladstone Investment and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gladstone Investment and NorAm Drilling AS, you can compare the effects of market volatilities on Gladstone Investment 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 Gladstone Investment with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and NorAm Drilling.
Diversification Opportunities for Gladstone Investment and NorAm Drilling
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gladstone and NorAm is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment 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 Gladstone Investment 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 Gladstone Investment 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 Gladstone Investment i.e., Gladstone Investment and NorAm Drilling go up and down completely randomly.
Pair Corralation between Gladstone Investment and NorAm Drilling
Assuming the 90 days horizon Gladstone Investment is expected to generate 9.9 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Gladstone Investment is 2.95 times less risky than NorAm Drilling. It trades about 0.03 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 266.00 in NorAm Drilling AS on September 14, 2024 and sell it today you would earn a total of 22.00 from holding NorAm Drilling AS or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gladstone Investment vs. NorAm Drilling AS
Performance |
| Timeline |
| Gladstone Investment |
| NorAm Drilling AS |
Gladstone Investment and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gladstone Investment and NorAm Drilling
The main advantage of trading using opposite Gladstone Investment and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gladstone Investment 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.| Gladstone Investment vs. Lyxor 1 | Gladstone Investment vs. Xtrackers ShortDAX | Gladstone Investment vs. Xtrackers LevDAX |
| NorAm Drilling vs. LGI Homes | NorAm Drilling vs. CENTURIA OFFICE REIT | NorAm Drilling vs. American Homes 4 | NorAm Drilling vs. DFS Furniture PLC |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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