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
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Eidesvik and NorAm is 0.39. 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 is expected to generate 4.56 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Eidesvik Offshore ASA is 1.21 times less risky than NorAm Drilling. It trades about 0.03 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,416 in NorAm Drilling AS on October 26, 2024 and sell it today you would earn a total of 284.00 from holding NorAm Drilling AS or generate 8.31% 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. Solstad Offsho | Eidesvik Offshore vs. Havila Shipping ASA | Eidesvik Offshore vs. Prosafe SE | Eidesvik Offshore vs. BW Offshore |
| NorAm Drilling vs. Lery Seafood Group | NorAm Drilling vs. Helgeland Sparebank | NorAm Drilling vs. Aurskog Sparebank | NorAm Drilling vs. Instabank ASA |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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