Correlation Between NorAm Drilling and Morrow Bank
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Morrow 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 Morrow 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 Morrow Bank ASA, you can compare the effects of market volatilities on NorAm Drilling and Morrow 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 Morrow Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Morrow Bank.
Diversification Opportunities for NorAm Drilling and Morrow Bank
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and Morrow is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Morrow Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morrow 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 Morrow Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morrow Bank ASA has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Morrow Bank go up and down completely randomly.
Pair Corralation between NorAm Drilling and Morrow Bank
Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the Morrow Bank. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.19 times less risky than Morrow Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Morrow Bank ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 506.00 in Morrow Bank ASA on August 29, 2024 and sell it today you would earn a total of 354.00 from holding Morrow Bank ASA or generate 69.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Morrow Bank ASA
Performance |
| Timeline |
| NorAm Drilling AS |
| Morrow Bank ASA |
NorAm Drilling and Morrow Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Morrow Bank
The main advantage of trading using opposite NorAm Drilling and Morrow Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Morrow 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 Morrow Bank will offset losses from the drop in Morrow 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 |
| Morrow Bank vs. Grong Sparebank | Morrow Bank vs. Proximar Seafood AS | Morrow Bank vs. Nordic Mining ASA | Morrow Bank vs. Odfjell Technology |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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