Correlation Between NorAm Drilling and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and FARO Technologies 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 FARO Technologies 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 FARO Technologies, you can compare the effects of market volatilities on NorAm Drilling and FARO Technologies 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 FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and FARO Technologies.
Diversification Opportunities for NorAm Drilling and FARO Technologies
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and FARO is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies 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 FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and FARO Technologies go up and down completely randomly.
Pair Corralation between NorAm Drilling and FARO Technologies
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the FARO Technologies. In addition to that, NorAm Drilling is 2.4 times more volatile than FARO Technologies. It trades about -0.04 of its total potential returns per unit of risk. FARO Technologies is currently generating about -0.02 per unit of volatility. If you would invest 2,620 in FARO Technologies on September 13, 2024 and sell it today you would lose (40.00) from holding FARO Technologies or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. FARO Technologies
Performance |
| Timeline |
| NorAm Drilling AS |
| FARO Technologies |
NorAm Drilling and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and FARO Technologies
The main advantage of trading using opposite NorAm Drilling and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| NorAm Drilling vs. PennantPark Investment | NorAm Drilling vs. Gladstone Investment | NorAm Drilling vs. WisdomTree Investments | NorAm Drilling vs. AOYAMA TRADING |
| FARO Technologies vs. HEXAGON AB ADR1 | FARO Technologies vs. Superior Plus Corp | FARO Technologies vs. SIVERS SEMICONDUCTORS AB | FARO Technologies 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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