Correlation Between NorAm Drilling and EAGLE MATERIALS
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and EAGLE MATERIALS 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 EAGLE MATERIALS 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 EAGLE MATERIALS, you can compare the effects of market volatilities on NorAm Drilling and EAGLE MATERIALS 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 EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and EAGLE MATERIALS.
Diversification Opportunities for NorAm Drilling and EAGLE MATERIALS
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NorAm and EAGLE is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and EAGLE MATERIALS go up and down completely randomly.
Pair Corralation between NorAm Drilling and EAGLE MATERIALS
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 2.4 times more return on investment than EAGLE MATERIALS. However, NorAm Drilling is 2.4 times more volatile than EAGLE MATERIALS. It trades about 0.12 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.3 per unit of risk. If you would invest 269.00 in NorAm Drilling AS on September 12, 2024 and sell it today you would earn a total of 25.00 from holding NorAm Drilling AS or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. EAGLE MATERIALS
Performance |
| Timeline |
| NorAm Drilling AS |
| EAGLE MATERIALS |
NorAm Drilling and EAGLE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and EAGLE MATERIALS
The main advantage of trading using opposite NorAm Drilling and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, EAGLE MATERIALS 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 EAGLE MATERIALS will offset losses from the drop in EAGLE MATERIALS's long position.| NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc |
| EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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