Correlation Between NorAm Drilling and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy, you can compare the effects of market volatilities on NorAm Drilling and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and CenterPoint Energy.
Diversification Opportunities for NorAm Drilling and CenterPoint Energy
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and CenterPoint is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and CenterPoint Energy go up and down completely randomly.
Pair Corralation between NorAm Drilling and CenterPoint Energy
Assuming the 90 days horizon NorAm Drilling is expected to generate 1.21 times less return on investment than CenterPoint Energy. In addition to that, NorAm Drilling is 3.27 times more volatile than CenterPoint Energy. It trades about 0.01 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.05 per unit of volatility. If you would invest 2,559 in CenterPoint Energy on September 2, 2024 and sell it today you would earn a total of 481.00 from holding CenterPoint Energy or generate 18.8% 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. CenterPoint Energy
Performance |
| Timeline |
| NorAm Drilling AS |
| CenterPoint Energy |
NorAm Drilling and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and CenterPoint Energy
The main advantage of trading using opposite NorAm Drilling and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| NorAm Drilling vs. SIEM OFFSHORE NEW | NorAm Drilling vs. UMC Electronics Co | NorAm Drilling vs. LPKF Laser Electronics | NorAm Drilling vs. CECO ENVIRONMENTAL |
| CenterPoint Energy vs. Snam SpA | CenterPoint Energy vs. Superior Plus Corp | CenterPoint Energy vs. NMI Holdings | CenterPoint Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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