Correlation Between NorAm Drilling and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Hitachi Construction 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 Hitachi Construction 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 Hitachi Construction Machinery, you can compare the effects of market volatilities on NorAm Drilling and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Hitachi Construction.
Diversification Opportunities for NorAm Drilling and Hitachi Construction
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NorAm and Hitachi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Hitachi Construction go up and down completely randomly.
Pair Corralation between NorAm Drilling and Hitachi Construction
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 2.43 times more return on investment than Hitachi Construction. However, NorAm Drilling is 2.43 times more volatile than Hitachi Construction Machinery. It trades about 0.02 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.01 per unit of risk. If you would invest 325.00 in NorAm Drilling AS on September 12, 2024 and sell it today you would lose (30.00) from holding NorAm Drilling AS or give up 9.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Hitachi Construction Machinery
Performance |
| Timeline |
| NorAm Drilling AS |
| Hitachi Construction |
NorAm Drilling and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Hitachi Construction
The main advantage of trading using opposite NorAm Drilling and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.| NorAm Drilling vs. ARDAGH METAL PACDL 0001 | NorAm Drilling vs. Performance Food Group | NorAm Drilling vs. INDOFOOD AGRI RES | NorAm Drilling vs. United Natural Foods |
| Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. SIVERS SEMICONDUCTORS AB | Hitachi Construction vs. NorAm Drilling AS | Hitachi Construction vs. Norsk Hydro ASA |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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