Correlation Between NorAm Drilling and Major Drilling
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Major Drilling 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 Major Drilling 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 Major Drilling Group, you can compare the effects of market volatilities on NorAm Drilling and Major Drilling 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 Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Major Drilling.
Diversification Opportunities for NorAm Drilling and Major Drilling
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NorAm and Major is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Major Drilling go up and down completely randomly.
Pair Corralation between NorAm Drilling and Major Drilling
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 1.36 times more return on investment than Major Drilling. However, NorAm Drilling is 1.36 times more volatile than Major Drilling Group. It trades about 0.15 of its potential returns per unit of risk. Major Drilling Group is currently generating about 0.06 per unit of risk. If you would invest 267.00 in NorAm Drilling AS on August 29, 2024 and sell it today you would earn a total of 31.00 from holding NorAm Drilling AS or generate 11.61% 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. Major Drilling Group
Performance |
| Timeline |
| NorAm Drilling AS |
| Major Drilling Group |
NorAm Drilling and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Major Drilling
The main advantage of trading using opposite NorAm Drilling and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.| NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc |
| Major Drilling vs. Superior Plus Corp | Major Drilling vs. NMI Holdings | Major Drilling vs. Origin Agritech | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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