Correlation Between Aker Solutions and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Aker Solutions 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 Aker Solutions and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker Solutions ASA and NorAm Drilling AS, you can compare the effects of market volatilities on Aker Solutions 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 Aker Solutions with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker Solutions and NorAm Drilling.
Diversification Opportunities for Aker Solutions and NorAm Drilling
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aker and NorAm is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Aker Solutions ASA 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 Aker Solutions 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 Aker Solutions ASA 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 Aker Solutions i.e., Aker Solutions and NorAm Drilling go up and down completely randomly.
Pair Corralation between Aker Solutions and NorAm Drilling
Assuming the 90 days trading horizon Aker Solutions ASA is expected to generate 1.4 times more return on investment than NorAm Drilling. However, Aker Solutions is 1.4 times more volatile than NorAm Drilling AS. It trades about 0.08 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.01 per unit of risk. If you would invest 2,137 in Aker Solutions ASA on September 3, 2024 and sell it today you would earn a total of 1,009 from holding Aker Solutions ASA or generate 47.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker Solutions ASA vs. NorAm Drilling AS
Performance |
| Timeline |
| Aker Solutions ASA |
| NorAm Drilling AS |
Aker Solutions and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker Solutions and NorAm Drilling
The main advantage of trading using opposite Aker Solutions and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Solutions 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.| Aker Solutions vs. Subsea 7 SA | Aker Solutions vs. Aker ASA | Aker Solutions vs. Dno ASA | Aker Solutions vs. Aker Carbon Capture |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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