Correlation Between Caseys General and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Caseys General 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 Caseys General and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caseys General Stores and NorAm Drilling AS, you can compare the effects of market volatilities on Caseys General 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 Caseys General with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and NorAm Drilling.
Diversification Opportunities for Caseys General and NorAm Drilling
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Caseys and NorAm is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores 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 Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and NorAm Drilling go up and down completely randomly.
Pair Corralation between Caseys General and NorAm Drilling
Assuming the 90 days trading horizon Caseys General Stores is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Caseys General Stores is 5.02 times less risky than NorAm Drilling. The stock trades about -0.23 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 220.00 in NorAm Drilling AS on October 21, 2024 and sell it today you would earn a total of 84.00 from holding NorAm Drilling AS or generate 38.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caseys General Stores vs. NorAm Drilling AS
Performance |
| Timeline |
| Caseys General Stores |
| NorAm Drilling AS |
Caseys General and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caseys General and NorAm Drilling
The main advantage of trading using opposite Caseys General and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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.| Caseys General vs. CVS Health | Caseys General vs. Take Two Interactive Software | Caseys General vs. MAGIC SOFTWARE ENTR | Caseys General vs. CARDINAL HEALTH |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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