Correlation Between ABB and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both ABB 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 ABB and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB and NorAm Drilling AS, you can compare the effects of market volatilities on ABB 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 ABB with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and NorAm Drilling.
Diversification Opportunities for ABB and NorAm Drilling
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between ABB and NorAm is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ABB 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 ABB 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 ABB 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 ABB i.e., ABB and NorAm Drilling go up and down completely randomly.
Pair Corralation between ABB and NorAm Drilling
Assuming the 90 days trading horizon ABB is expected to generate 1.06 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, ABB is 2.32 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 0.0 of returns per unit of risk over similar time horizon. If you would invest 309.00 in NorAm Drilling AS on September 3, 2024 and sell it today you would lose (19.00) from holding NorAm Drilling AS or give up 6.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABB vs. NorAm Drilling AS
Performance |
| Timeline |
| ABB |
| NorAm Drilling AS |
ABB and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB and NorAm Drilling
The main advantage of trading using opposite ABB and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB 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.The idea behind ABB and NorAm Drilling AS 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.| NorAm Drilling vs. Townsquare Media | NorAm Drilling vs. American Public Education | NorAm Drilling vs. DeVry Education Group | NorAm Drilling vs. Seven West Media |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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