Correlation Between STMICROELECTRONICS and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS 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 STMICROELECTRONICS and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMICROELECTRONICS and NorAm Drilling AS, you can compare the effects of market volatilities on STMICROELECTRONICS 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 STMICROELECTRONICS with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and NorAm Drilling.
Diversification Opportunities for STMICROELECTRONICS and NorAm Drilling
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMICROELECTRONICS and NorAm is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS i.e., STMICROELECTRONICS and NorAm Drilling go up and down completely randomly.
Pair Corralation between STMICROELECTRONICS and NorAm Drilling
Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, STMICROELECTRONICS is 1.55 times less risky than NorAm Drilling. The stock trades about -0.05 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 295.00 in NorAm Drilling AS on October 16, 2024 and sell it today you would earn a total of 18.00 from holding NorAm Drilling AS or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMICROELECTRONICS vs. NorAm Drilling AS
Performance |
| Timeline |
| STMICROELECTRONICS |
| NorAm Drilling AS |
STMICROELECTRONICS and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMICROELECTRONICS and NorAm Drilling
The main advantage of trading using opposite STMICROELECTRONICS and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS 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.| STMICROELECTRONICS vs. CDN IMPERIAL BANK | STMICROELECTRONICS vs. Sun Life Financial | STMICROELECTRONICS vs. FLOW TRADERS LTD | STMICROELECTRONICS vs. TRADEGATE |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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