Correlation Between NorAm Drilling and Deep Value
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Deep Value 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 Deep Value 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 Deep Value Driller, you can compare the effects of market volatilities on NorAm Drilling and Deep Value 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 Deep Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Deep Value.
Diversification Opportunities for NorAm Drilling and Deep Value
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorAm and Deep is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller 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 Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Deep Value go up and down completely randomly.
Pair Corralation between NorAm Drilling and Deep Value
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 0.65 times more return on investment than Deep Value. However, NorAm Drilling AS is 1.54 times less risky than Deep Value. It trades about -0.24 of its potential returns per unit of risk. Deep Value Driller is currently generating about -0.44 per unit of risk. If you would invest 3,616 in NorAm Drilling AS on August 29, 2024 and sell it today you would lose (226.00) from holding NorAm Drilling AS or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Deep Value Driller
Performance |
| Timeline |
| NorAm Drilling AS |
| Deep Value Driller |
NorAm Drilling and Deep Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Deep Value
The main advantage of trading using opposite NorAm Drilling and Deep Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Deep Value 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 Deep Value will offset losses from the drop in Deep Value's long position.| NorAm Drilling vs. Subsea 7 SA | NorAm Drilling vs. Aker ASA | NorAm Drilling vs. Dno ASA | NorAm Drilling vs. Aker Carbon Capture |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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