Correlation Between Direct Line and NorAm Drilling

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Direct Line 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 Direct Line and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Line Insurance and NorAm Drilling AS, you can compare the effects of market volatilities on Direct Line 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 Direct Line with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and NorAm Drilling.

Diversification Opportunities for Direct Line and NorAm Drilling

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Direct and NorAm is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance 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 Direct Line 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 Direct Line Insurance 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 Direct Line i.e., Direct Line and NorAm Drilling go up and down completely randomly.

Pair Corralation between Direct Line and NorAm Drilling

Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.45 times more return on investment than NorAm Drilling. However, Direct Line Insurance is 2.21 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  299.00  in Direct Line Insurance on October 11, 2024 and sell it today you would earn a total of  9.00  from holding Direct Line Insurance or generate 3.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Direct Line Insurance  vs.  NorAm Drilling AS

 Performance 
       Timeline  
Direct Line Insurance 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Direct Line reported solid returns over the last few months and may actually be approaching a breakup point.
NorAm Drilling AS 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NorAm Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Direct Line and NorAm Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direct Line and NorAm Drilling

The main advantage of trading using opposite Direct Line and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line 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.
The idea behind Direct Line Insurance and NorAm Drilling AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

Other Complementary Tools

Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins