Correlation Between LAir Liquide and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both LAir Liquide 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 LAir Liquide and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAir Liquide SA and NorAm Drilling AS, you can compare the effects of market volatilities on LAir Liquide 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 LAir Liquide with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and NorAm Drilling.
Diversification Opportunities for LAir Liquide and NorAm Drilling
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between LAir and NorAm is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA 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 LAir Liquide 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 LAir Liquide SA 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 LAir Liquide i.e., LAir Liquide and NorAm Drilling go up and down completely randomly.
Pair Corralation between LAir Liquide and NorAm Drilling
Assuming the 90 days trading horizon LAir Liquide SA is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, LAir Liquide SA is 3.96 times less risky than NorAm Drilling. The stock trades about -0.17 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 311.00 in NorAm Drilling AS on August 25, 2024 and sell it today you would lose (3.00) from holding NorAm Drilling AS or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LAir Liquide SA vs. NorAm Drilling AS
Performance |
| Timeline |
| LAir Liquide SA |
| NorAm Drilling AS |
LAir Liquide and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and NorAm Drilling
The main advantage of trading using opposite LAir Liquide and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide 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.| LAir Liquide vs. Apple Inc | LAir Liquide vs. Apple Inc | LAir Liquide vs. Apple Inc | LAir Liquide vs. Apple Inc |
| NorAm Drilling vs. Norwegian Air Shuttle | NorAm Drilling vs. WIZZ AIR HLDGUNSPADR4 | NorAm Drilling vs. LAir Liquide SA | NorAm Drilling vs. Fair Isaac Corp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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