Correlation Between Aqua America and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Aqua America 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 Aqua America and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqua America and NorAm Drilling AS, you can compare the effects of market volatilities on Aqua America 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 Aqua America with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua America and NorAm Drilling.
Diversification Opportunities for Aqua America and NorAm Drilling
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aqua and NorAm is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America 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 Aqua America 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 Aqua America 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 Aqua America i.e., Aqua America and NorAm Drilling go up and down completely randomly.
Pair Corralation between Aqua America and NorAm Drilling
Assuming the 90 days horizon Aqua America is expected to generate 0.38 times more return on investment than NorAm Drilling. However, Aqua America is 2.64 times less risky than NorAm Drilling. It trades about 0.19 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.02 per unit of risk. If you would invest 3,505 in Aqua America on September 3, 2024 and sell it today you would earn a total of 259.00 from holding Aqua America or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqua America vs. NorAm Drilling AS
Performance |
| Timeline |
| Aqua America |
| NorAm Drilling AS |
Aqua America and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqua America and NorAm Drilling
The main advantage of trading using opposite Aqua America and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqua America 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.| Aqua America vs. United Utilities Group | Aqua America vs. Guangdong Investment Limited | Aqua America vs. Superior Plus Corp | Aqua America vs. NMI Holdings |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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