Correlation Between NorAm Drilling and Axfood AB
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Axfood AB 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 Axfood AB 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 Axfood AB, you can compare the effects of market volatilities on NorAm Drilling and Axfood AB 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 Axfood AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Axfood AB.
Diversification Opportunities for NorAm Drilling and Axfood AB
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NorAm and Axfood is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Axfood AB go up and down completely randomly.
Pair Corralation between NorAm Drilling and Axfood AB
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Axfood AB. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.09 times less risky than Axfood AB. The stock trades about -0.37 of its potential returns per unit of risk. The Axfood AB is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 2,018 in Axfood AB on September 19, 2024 and sell it today you would lose (44.00) from holding Axfood AB or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Axfood AB
Performance |
| Timeline |
| NorAm Drilling AS |
| Axfood AB |
NorAm Drilling and Axfood AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Axfood AB
The main advantage of trading using opposite NorAm Drilling and Axfood AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Axfood AB 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 Axfood AB will offset losses from the drop in Axfood AB's long position.| NorAm Drilling vs. Japan Medical Dynamic | NorAm Drilling vs. Wizz Air Holdings | NorAm Drilling vs. WIZZ AIR HLDGUNSPADR4 | NorAm Drilling vs. CVR Medical Corp |
| Axfood AB vs. Metro AG | Axfood AB vs. Superior Plus Corp | Axfood AB vs. SIVERS SEMICONDUCTORS AB | Axfood AB vs. NorAm Drilling AS |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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