Correlation Between TGS NOPEC and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both TGS NOPEC 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 TGS NOPEC and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TGS NOPEC Geophysical and NorAm Drilling AS, you can compare the effects of market volatilities on TGS NOPEC 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 TGS NOPEC with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of TGS NOPEC and NorAm Drilling.
Diversification Opportunities for TGS NOPEC and NorAm Drilling
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TGS and NorAm is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding TGS NOPEC Geophysical 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 TGS NOPEC 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 TGS NOPEC Geophysical 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 TGS NOPEC i.e., TGS NOPEC and NorAm Drilling go up and down completely randomly.
Pair Corralation between TGS NOPEC and NorAm Drilling
Assuming the 90 days trading horizon TGS NOPEC Geophysical is expected to generate 1.51 times more return on investment than NorAm Drilling. However, TGS NOPEC is 1.51 times more volatile than NorAm Drilling AS. It trades about 0.0 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.01 per unit of risk. If you would invest 11,927 in TGS NOPEC Geophysical on September 3, 2024 and sell it today you would lose (1,137) from holding TGS NOPEC Geophysical or give up 9.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TGS NOPEC Geophysical vs. NorAm Drilling AS
Performance |
| Timeline |
| TGS NOPEC Geophysical |
| NorAm Drilling AS |
TGS NOPEC and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TGS NOPEC and NorAm Drilling
The main advantage of trading using opposite TGS NOPEC and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TGS NOPEC 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.| TGS NOPEC vs. Subsea 7 SA | TGS NOPEC vs. Storebrand ASA | TGS NOPEC vs. Aker Solutions ASA | TGS NOPEC vs. Dno ASA |
| NorAm Drilling vs. Aker ASA | NorAm Drilling vs. Subsea 7 SA | NorAm Drilling vs. Aker Solutions ASA | NorAm Drilling vs. TGS NOPEC Geophysical |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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