Correlation Between AM EAGLE and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both AM EAGLE 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 AM EAGLE and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AM EAGLE OUTFITTERS and NorAm Drilling AS, you can compare the effects of market volatilities on AM EAGLE 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 AM EAGLE with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and NorAm Drilling.
Diversification Opportunities for AM EAGLE and NorAm Drilling
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AFG and NorAm is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS 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 AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and NorAm Drilling go up and down completely randomly.
Pair Corralation between AM EAGLE and NorAm Drilling
Assuming the 90 days trading horizon AM EAGLE is expected to generate 8.14 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, AM EAGLE OUTFITTERS is 4.01 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 0.06 of returns per unit of risk over similar time horizon. If you would invest 135.00 in NorAm Drilling AS on October 13, 2024 and sell it today you would earn a total of 156.00 from holding NorAm Drilling AS or generate 115.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
AM EAGLE OUTFITTERS vs. NorAm Drilling AS
Performance |
| Timeline |
| AM EAGLE OUTFITTERS |
| NorAm Drilling AS |
AM EAGLE and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AM EAGLE and NorAm Drilling
The main advantage of trading using opposite AM EAGLE and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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.| AM EAGLE vs. VULCAN MATERIALS | AM EAGLE vs. INDOFOOD AGRI RES | AM EAGLE vs. GWILLI FOOD | AM EAGLE vs. Heidelberg Materials AG |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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