Correlation Between Sinopec Shanghai and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Sinopec Shanghai and NorAm 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 Sinopec Shanghai and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sinopec Shanghai Petrochemical and NorAm Drilling AS, you can compare the effects of market volatilities on Sinopec Shanghai and NorAm 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 Sinopec Shanghai with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Shanghai and NorAm Drilling.
Diversification Opportunities for Sinopec Shanghai and NorAm Drilling
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sinopec and NorAm is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS and Sinopec Shanghai 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 Sinopec Shanghai Petrochemical are associated (or correlated) with NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and NorAm Drilling go up and down completely randomly.
Pair Corralation between Sinopec Shanghai and NorAm Drilling
Assuming the 90 days trading horizon Sinopec Shanghai Petrochemical is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Sinopec Shanghai Petrochemical is 1.08 times less risky than NorAm Drilling. The stock trades about -0.07 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 209.00 in NorAm Drilling AS on October 30, 2024 and sell it today you would earn a total of 96.00 from holding NorAm Drilling AS or generate 45.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sinopec Shanghai Petrochemical vs. NorAm Drilling AS
Performance |
| Timeline |
| Sinopec Shanghai Pet |
| NorAm Drilling AS |
Sinopec Shanghai and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sinopec Shanghai and NorAm Drilling
The main advantage of trading using opposite Sinopec Shanghai and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Shanghai position performs unexpectedly, NorAm 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Sinopec Shanghai vs. AGF Management Limited | Sinopec Shanghai vs. Ringmetall SE | Sinopec Shanghai vs. Waste Management | Sinopec Shanghai vs. VARIOUS EATERIES LS |
| NorAm Drilling vs. STRAYER EDUCATION | NorAm Drilling vs. PennantPark Investment | NorAm Drilling vs. Laureate Education | NorAm Drilling vs. New Residential Investment |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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