Correlation Between NorAm Drilling and BHP Group
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on NorAm Drilling and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and BHP Group.
Diversification Opportunities for NorAm Drilling and BHP Group
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NorAm and BHP is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and BHP Group go up and down completely randomly.
Pair Corralation between NorAm Drilling and BHP Group
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 6.96 times more return on investment than BHP Group. However, NorAm Drilling is 6.96 times more volatile than BHP Group Limited. It trades about 0.07 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.01 per unit of risk. If you would invest 80.00 in NorAm Drilling AS on August 25, 2024 and sell it today you would earn a total of 228.00 from holding NorAm Drilling AS or generate 285.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. BHP Group Limited
Performance |
| Timeline |
| NorAm Drilling AS |
| BHP Group Limited |
NorAm Drilling and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and BHP Group
The main advantage of trading using opposite NorAm Drilling and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| NorAm Drilling vs. Norwegian Air Shuttle | NorAm Drilling vs. WIZZ AIR HLDGUNSPADR4 | NorAm Drilling vs. LAir Liquide SA | NorAm Drilling vs. Fair Isaac Corp |
| BHP Group vs. BOS BETTER ONLINE | BHP Group vs. Southwest Airlines Co | BHP Group vs. Tsingtao Brewery | BHP Group vs. American Airlines Group |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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