Correlation Between Hufvudstaden and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Hufvudstaden 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 Hufvudstaden and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hufvudstaden AB and NorAm Drilling AS, you can compare the effects of market volatilities on Hufvudstaden 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 Hufvudstaden with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hufvudstaden and NorAm Drilling.
Diversification Opportunities for Hufvudstaden and NorAm Drilling
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hufvudstaden and NorAm is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hufvudstaden AB 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 Hufvudstaden 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 Hufvudstaden AB 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 Hufvudstaden i.e., Hufvudstaden and NorAm Drilling go up and down completely randomly.
Pair Corralation between Hufvudstaden and NorAm Drilling
Assuming the 90 days trading horizon Hufvudstaden is expected to generate 12.18 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Hufvudstaden AB is 1.96 times less risky than NorAm Drilling. It trades about 0.02 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 20.00 in NorAm Drilling AS on November 27, 2024 and sell it today you would earn a total of 270.00 from holding NorAm Drilling AS or generate 1350.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hufvudstaden AB vs. NorAm Drilling AS
Performance |
| Timeline |
| Hufvudstaden AB |
| NorAm Drilling AS |
Hufvudstaden and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hufvudstaden and NorAm Drilling
The main advantage of trading using opposite Hufvudstaden and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hufvudstaden 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.| Hufvudstaden vs. Nordic Semiconductor ASA | Hufvudstaden vs. COREBRIDGE FINANCIAL INC | Hufvudstaden vs. BANKINTER ADR 2007 | Hufvudstaden vs. Magnachip Semiconductor |
| NorAm Drilling vs. Sims Metal Management | NorAm Drilling vs. ULTRA CLEAN HLDGS | NorAm Drilling vs. Strategic Education | NorAm Drilling vs. Cleanaway Waste Management |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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