Correlation Between NorAm Drilling and KASPIKZ 1
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and KASPIKZ 1 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 KASPIKZ 1 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 KASPIKZ 1, you can compare the effects of market volatilities on NorAm Drilling and KASPIKZ 1 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 KASPIKZ 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and KASPIKZ 1.
Diversification Opportunities for NorAm Drilling and KASPIKZ 1
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NorAm and KASPIKZ is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and KASPIKZ 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KASPIKZ 1 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 KASPIKZ 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KASPIKZ 1 has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and KASPIKZ 1 go up and down completely randomly.
Pair Corralation between NorAm Drilling and KASPIKZ 1
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 3.59 times more return on investment than KASPIKZ 1. However, NorAm Drilling is 3.59 times more volatile than KASPIKZ 1. It trades about 0.06 of its potential returns per unit of risk. KASPIKZ 1 is currently generating about 0.05 per unit of risk. If you would invest 135.00 in NorAm Drilling AS on October 14, 2024 and sell it today you would earn a total of 156.00 from holding NorAm Drilling AS or generate 115.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. KASPIKZ 1
Performance |
| Timeline |
| NorAm Drilling AS |
| KASPIKZ 1 |
NorAm Drilling and KASPIKZ 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and KASPIKZ 1
The main advantage of trading using opposite NorAm Drilling and KASPIKZ 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, KASPIKZ 1 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 KASPIKZ 1 will offset losses from the drop in KASPIKZ 1's long position.The idea behind NorAm Drilling AS and KASPIKZ 1 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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