Correlation Between NorAm Drilling and Focus Home
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Focus Home 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 Focus Home 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 Focus Home Interactive, you can compare the effects of market volatilities on NorAm Drilling and Focus Home 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 Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Focus Home.
Diversification Opportunities for NorAm Drilling and Focus Home
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between NorAm and Focus is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive 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 Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Focus Home go up and down completely randomly.
Pair Corralation between NorAm Drilling and Focus Home
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 1.06 times more return on investment than Focus Home. However, NorAm Drilling is 1.06 times more volatile than Focus Home Interactive. It trades about 0.46 of its potential returns per unit of risk. Focus Home Interactive is currently generating about 0.17 per unit of risk. If you would invest 222.00 in NorAm Drilling AS on October 19, 2024 and sell it today you would earn a total of 90.00 from holding NorAm Drilling AS or generate 40.54% 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. Focus Home Interactive
Performance |
| Timeline |
| NorAm Drilling AS |
| Focus Home Interactive |
NorAm Drilling and Focus Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Focus Home
The main advantage of trading using opposite NorAm Drilling and Focus Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Focus Home 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 Focus Home will offset losses from the drop in Focus Home's long position.| NorAm Drilling vs. HUTCHISON TELECOMM | NorAm Drilling vs. Townsquare Media | NorAm Drilling vs. Dave Busters Entertainment | NorAm Drilling vs. TOWNSQUARE MEDIA INC |
| Focus Home vs. Corporate Office Properties | Focus Home vs. Wayside Technology Group | Focus Home vs. BW OFFSHORE LTD | Focus Home vs. NorAm Drilling AS |
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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