Correlation Between NorAm Drilling and Dolphin Drilling
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Dolphin 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 NorAm Drilling and Dolphin Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorAm Drilling AS and Dolphin Drilling AS, you can compare the effects of market volatilities on NorAm Drilling and Dolphin 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 NorAm Drilling with a short position of Dolphin Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Dolphin Drilling.
Diversification Opportunities for NorAm Drilling and Dolphin Drilling
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between NorAm and Dolphin is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Dolphin Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Drilling and NorAm Drilling 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 NorAm Drilling AS are associated (or correlated) with Dolphin Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Drilling has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Dolphin Drilling go up and down completely randomly.
Pair Corralation between NorAm Drilling and Dolphin Drilling
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 0.55 times more return on investment than Dolphin Drilling. However, NorAm Drilling AS is 1.83 times less risky than Dolphin Drilling. It trades about -0.04 of its potential returns per unit of risk. Dolphin Drilling AS is currently generating about -0.07 per unit of risk. If you would invest 5,048 in NorAm Drilling AS on September 1, 2024 and sell it today you would lose (1,598) from holding NorAm Drilling AS or give up 31.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Dolphin Drilling AS
Performance |
| Timeline |
| NorAm Drilling AS |
| Dolphin Drilling |
NorAm Drilling and Dolphin Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Dolphin Drilling
The main advantage of trading using opposite NorAm Drilling and Dolphin Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Dolphin 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 Dolphin Drilling will offset losses from the drop in Dolphin Drilling's long position.| NorAm Drilling vs. Sparebank 1 SMN | NorAm Drilling vs. Jaeren Sparebank | NorAm Drilling vs. Eidesvik Offshore ASA | NorAm Drilling vs. Helgeland Sparebank |
| Dolphin Drilling vs. Shelf Drilling | Dolphin Drilling vs. BW Offshore | Dolphin Drilling vs. Subsea 7 SA | Dolphin Drilling vs. Elkem 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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