Correlation Between NorAm Drilling and Metro AG
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Metro AG 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 Metro AG 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 Metro AG, you can compare the effects of market volatilities on NorAm Drilling and Metro AG 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Metro AG.
Diversification Opportunities for NorAm Drilling and Metro AG
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NorAm and Metro is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Metro AG go up and down completely randomly.
Pair Corralation between NorAm Drilling and Metro AG
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Metro AG. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.28 times less risky than Metro AG. The stock trades about -0.37 of its potential returns per unit of risk. The Metro AG is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 430.00 in Metro AG on September 19, 2024 and sell it today you would lose (29.00) from holding Metro AG or give up 6.74% 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. Metro AG
Performance |
| Timeline |
| NorAm Drilling AS |
| Metro AG |
NorAm Drilling and Metro AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Metro AG
The main advantage of trading using opposite NorAm Drilling and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG'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 |
| Metro AG vs. Metro AG | Metro AG vs. Superior Plus Corp | Metro AG vs. SIVERS SEMICONDUCTORS AB | Metro AG 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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