Correlation Between NEXA RESOURCES and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both NEXA RESOURCES 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 NEXA RESOURCES and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXA RESOURCES SA and NorAm Drilling AS, you can compare the effects of market volatilities on NEXA RESOURCES 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 NEXA RESOURCES with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXA RESOURCES and NorAm Drilling.
Diversification Opportunities for NEXA RESOURCES and NorAm Drilling
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NEXA and NorAm is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NEXA RESOURCES SA 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 NEXA RESOURCES 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 NEXA RESOURCES SA 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 NEXA RESOURCES i.e., NEXA RESOURCES and NorAm Drilling go up and down completely randomly.
Pair Corralation between NEXA RESOURCES and NorAm Drilling
Assuming the 90 days horizon NEXA RESOURCES is expected to generate 1.28 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, NEXA RESOURCES SA is 2.31 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 0.01 of returns per unit of risk over similar time horizon. If you would invest 312.00 in NorAm Drilling AS on August 24, 2024 and sell it today you would lose (3.00) from holding NorAm Drilling AS or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXA RESOURCES SA vs. NorAm Drilling AS
Performance |
| Timeline |
| NEXA RESOURCES SA |
| NorAm Drilling AS |
NEXA RESOURCES and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXA RESOURCES and NorAm Drilling
The main advantage of trading using opposite NEXA RESOURCES and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXA RESOURCES 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.| NEXA RESOURCES vs. Mineral Resources Limited | NEXA RESOURCES vs. ADRIATIC METALS LS 013355 | NEXA RESOURCES vs. Superior Plus Corp | NEXA RESOURCES vs. NMI Holdings |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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