Correlation Between NorAm Drilling and Gap
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Gap 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 Gap 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 The Gap, you can compare the effects of market volatilities on NorAm Drilling and Gap 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 Gap. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Gap.
Diversification Opportunities for NorAm Drilling and Gap
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and Gap is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Gap go up and down completely randomly.
Pair Corralation between NorAm Drilling and Gap
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Gap. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.18 times less risky than Gap. The stock trades about -0.01 of its potential returns per unit of risk. The The Gap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,949 in The Gap on September 1, 2024 and sell it today you would earn a total of 325.00 from holding The Gap or generate 16.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
NorAm Drilling AS vs. The Gap
Performance |
| Timeline |
| NorAm Drilling AS |
| Gap |
NorAm Drilling and Gap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Gap
The main advantage of trading using opposite NorAm Drilling and Gap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Gap 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 Gap will offset losses from the drop in Gap's long position.| NorAm Drilling vs. Martin Marietta Materials | NorAm Drilling vs. Reinsurance Group of | NorAm Drilling vs. ZURICH INSURANCE GROUP | NorAm Drilling vs. LIFENET INSURANCE CO |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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