Correlation Between NorAm Drilling and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Cisco Systems 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 Cisco Systems 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 Cisco Systems, you can compare the effects of market volatilities on NorAm Drilling and Cisco Systems 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Cisco Systems.
Diversification Opportunities for NorAm Drilling and Cisco Systems
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between NorAm and Cisco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Cisco Systems go up and down completely randomly.
Pair Corralation between NorAm Drilling and Cisco Systems
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Cisco Systems. In addition to that, NorAm Drilling is 4.21 times more volatile than Cisco Systems. It trades about -0.01 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.38 per unit of volatility. If you would invest 4,715 in Cisco Systems on August 28, 2024 and sell it today you would earn a total of 890.00 from holding Cisco Systems or generate 18.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Cisco Systems
Performance |
| Timeline |
| NorAm Drilling AS |
| Cisco Systems |
NorAm Drilling and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Cisco Systems
The main advantage of trading using opposite NorAm Drilling and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.| NorAm Drilling vs. Air Transport Services | NorAm Drilling vs. Pembina Pipeline Corp | NorAm Drilling vs. NAKED WINES PLC | NorAm Drilling vs. Fukuyama Transporting Co |
| Cisco Systems vs. Telefonaktiebolaget LM Ericsson | Cisco Systems vs. Superior Plus Corp | Cisco Systems vs. NMI Holdings | Cisco Systems vs. Origin Agritech |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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