Correlation Between Aluminumof China and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Aluminumof China 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 Aluminumof China and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and NorAm Drilling AS, you can compare the effects of market volatilities on Aluminumof China 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 Aluminumof China with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and NorAm Drilling.
Diversification Opportunities for Aluminumof China and NorAm Drilling
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aluminumof and NorAm is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of 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 Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and NorAm Drilling go up and down completely randomly.
Pair Corralation between Aluminumof China and NorAm Drilling
Assuming the 90 days horizon Aluminum of is expected to generate 0.83 times more return on investment than NorAm Drilling. However, Aluminum of is 1.21 times less risky than NorAm Drilling. It trades about 0.12 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 51.00 in Aluminum of on September 4, 2024 and sell it today you would earn a total of 5.00 from holding Aluminum of or generate 9.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Aluminum of vs. NorAm Drilling AS
Performance |
| Timeline |
| Aluminumof China |
| NorAm Drilling AS |
Aluminumof China and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and NorAm Drilling
The main advantage of trading using opposite Aluminumof China and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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.| Aluminumof China vs. FIREWEED METALS P | Aluminumof China vs. Lion One Metals | Aluminumof China vs. Kaiser Aluminum | Aluminumof China vs. Ultra Clean Holdings |
| NorAm Drilling vs. AUTO TRADER ADR | NorAm Drilling vs. IDP EDUCATION LTD | NorAm Drilling vs. Perdoceo Education | NorAm Drilling vs. Strategic Education |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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