Correlation Between NorAm Drilling and Kraft Bank
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Kraft Bank 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 Kraft Bank 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 Kraft Bank Asa, you can compare the effects of market volatilities on NorAm Drilling and Kraft Bank 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 Kraft Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Kraft Bank.
Diversification Opportunities for NorAm Drilling and Kraft Bank
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorAm and Kraft is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Kraft Bank Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Bank Asa 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 Kraft Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Bank Asa has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Kraft Bank go up and down completely randomly.
Pair Corralation between NorAm Drilling and Kraft Bank
Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the Kraft Bank. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.23 times less risky than Kraft Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Kraft Bank Asa is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 773.00 in Kraft Bank Asa on August 25, 2024 and sell it today you would earn a total of 117.00 from holding Kraft Bank Asa or generate 15.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Kraft Bank Asa
Performance |
| Timeline |
| NorAm Drilling AS |
| Kraft Bank Asa |
NorAm Drilling and Kraft Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Kraft Bank
The main advantage of trading using opposite NorAm Drilling and Kraft Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Kraft Bank 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 Kraft Bank will offset losses from the drop in Kraft Bank'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 |
| Kraft Bank vs. DnB ASA | Kraft Bank vs. Sparebank 1 SR | Kraft Bank vs. Sparebank 1 SMN | Kraft Bank vs. Sparebanken Mre |
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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