Correlation Between NorAm Drilling and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on NorAm Drilling and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Norsk Hydro.
Diversification Opportunities for NorAm Drilling and Norsk Hydro
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NorAm and Norsk is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Norsk Hydro go up and down completely randomly.
Pair Corralation between NorAm Drilling and Norsk Hydro
Assuming the 90 days horizon NorAm Drilling is expected to generate 7.58 times less return on investment than Norsk Hydro. In addition to that, NorAm Drilling is 1.43 times more volatile than Norsk Hydro ASA. It trades about 0.01 of its total potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.12 per unit of volatility. If you would invest 573.00 in Norsk Hydro ASA on August 24, 2024 and sell it today you would earn a total of 46.00 from holding Norsk Hydro ASA or generate 8.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Norsk Hydro ASA
Performance |
| Timeline |
| NorAm Drilling AS |
| Norsk Hydro ASA |
NorAm Drilling and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Norsk Hydro
The main advantage of trading using opposite NorAm Drilling and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| NorAm Drilling vs. Siamgas And Petrochemicals | NorAm Drilling vs. Ping An Insurance | NorAm Drilling vs. Goosehead Insurance | NorAm Drilling vs. Grupo Carso SAB |
| Norsk Hydro vs. HEALTHCARE REAL A | Norsk Hydro vs. CVS Health | Norsk Hydro vs. Insteel Industries | Norsk Hydro vs. ZANAGA IRON ORE |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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