Correlation Between Applied Materials and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and NorAm Drilling AS, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and NorAm Drilling.
Diversification Opportunities for Applied Materials and NorAm Drilling
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Applied and NorAm is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and NorAm Drilling go up and down completely randomly.
Pair Corralation between Applied Materials and NorAm Drilling
Assuming the 90 days horizon Applied Materials is expected to generate 0.53 times more return on investment than NorAm Drilling. However, Applied Materials is 1.88 times less risky than NorAm Drilling. It trades about 0.04 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 13,027 in Applied Materials on August 25, 2024 and sell it today you would earn a total of 2,839 from holding Applied Materials or generate 21.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. NorAm Drilling AS
Performance |
| Timeline |
| Applied Materials |
| NorAm Drilling AS |
Applied Materials and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and NorAm Drilling
The main advantage of trading using opposite Applied Materials and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Beazer Homes USA | Applied Materials vs. INVITATION HOMES DL | Applied Materials vs. SOUTHWEST AIRLINES | Applied Materials vs. HomeToGo SE |
| NorAm Drilling vs. VIRGIN WINES UK | NorAm Drilling vs. Haier Smart Home | NorAm Drilling vs. Neinor Homes SA | NorAm Drilling vs. VIVA WINE GROUP |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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