Correlation Between Apple and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and NorAm Drilling AS, you can compare the effects of market volatilities on Apple 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 Apple with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and NorAm Drilling.
Diversification Opportunities for Apple and NorAm Drilling
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and NorAm is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and NorAm Drilling go up and down completely randomly.
Pair Corralation between Apple and NorAm Drilling
Assuming the 90 days trading horizon Apple is expected to generate 2.8 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Apple Inc is 2.67 times less risky than NorAm Drilling. It trades about 0.14 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 267.00 in NorAm Drilling AS on August 29, 2024 and sell it today you would earn a total of 31.00 from holding NorAm Drilling AS or generate 11.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. NorAm Drilling AS
Performance |
| Timeline |
| Apple Inc |
| NorAm Drilling AS |
Apple and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and NorAm Drilling
The main advantage of trading using opposite Apple and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Treasury Wine Estates | Apple vs. Daito Trust Construction | Apple vs. Granite Construction | Apple vs. TITAN MACHINERY |
| NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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