Correlation Between NorAm Drilling and Napatech
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Napatech 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 Napatech 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 Napatech AS, you can compare the effects of market volatilities on NorAm Drilling and Napatech 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 Napatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Napatech.
Diversification Opportunities for NorAm Drilling and Napatech
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorAm and Napatech is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Napatech AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Napatech AS 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 Napatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Napatech AS has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Napatech go up and down completely randomly.
Pair Corralation between NorAm Drilling and Napatech
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 0.55 times more return on investment than Napatech. However, NorAm Drilling AS is 1.82 times less risky than Napatech. It trades about -0.24 of its potential returns per unit of risk. Napatech AS is currently generating about -0.35 per unit of risk. If you would invest 3,671 in NorAm Drilling AS on September 4, 2024 and sell it today you would lose (261.00) from holding NorAm Drilling AS or give up 7.11% 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. Napatech AS
Performance |
| Timeline |
| NorAm Drilling AS |
| Napatech AS |
NorAm Drilling and Napatech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Napatech
The main advantage of trading using opposite NorAm Drilling and Napatech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Napatech 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 Napatech will offset losses from the drop in Napatech's long position.| NorAm Drilling vs. Aker ASA | NorAm Drilling vs. Subsea 7 SA | NorAm Drilling vs. Aker Solutions ASA | NorAm Drilling vs. TGS NOPEC Geophysical |
| Napatech vs. Idex ASA | Napatech vs. Next Biometrics Group | Napatech vs. Polight ASA | Napatech vs. Kitron 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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