Correlation Between Eidesvik Offshore and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Eidesvik Offshore 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 Eidesvik Offshore and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eidesvik Offshore ASA and NorAm Drilling AS, you can compare the effects of market volatilities on Eidesvik Offshore 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 Eidesvik Offshore with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eidesvik Offshore and NorAm Drilling.
Diversification Opportunities for Eidesvik Offshore and NorAm Drilling
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Eidesvik and NorAm is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA 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 Eidesvik Offshore 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 Eidesvik Offshore ASA 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 Eidesvik Offshore i.e., Eidesvik Offshore and NorAm Drilling go up and down completely randomly.
Pair Corralation between Eidesvik Offshore and NorAm Drilling
Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 1.31 times more return on investment than NorAm Drilling. However, Eidesvik Offshore is 1.31 times more volatile than NorAm Drilling AS. It trades about 0.05 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 858.00 in Eidesvik Offshore ASA on September 3, 2024 and sell it today you would earn a total of 464.00 from holding Eidesvik Offshore ASA or generate 54.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eidesvik Offshore ASA vs. NorAm Drilling AS
Performance |
| Timeline |
| Eidesvik Offshore ASA |
| NorAm Drilling AS |
Eidesvik Offshore and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eidesvik Offshore and NorAm Drilling
The main advantage of trading using opposite Eidesvik Offshore and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore 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.| Eidesvik Offshore vs. BW Energy | Eidesvik Offshore vs. Subsea 7 SA | Eidesvik Offshore vs. BW LPG | Eidesvik Offshore vs. Dno ASA |
| NorAm Drilling vs. Aker ASA | NorAm Drilling vs. Subsea 7 SA | NorAm Drilling vs. Aker Solutions ASA | NorAm Drilling vs. TGS NOPEC Geophysical |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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