Correlation Between NorAm Drilling and Erste Group
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Erste Group 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 Erste Group 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 Erste Group Bank, you can compare the effects of market volatilities on NorAm Drilling and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Erste Group.
Diversification Opportunities for NorAm Drilling and Erste Group
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NorAm and Erste is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Erste Group go up and down completely randomly.
Pair Corralation between NorAm Drilling and Erste Group
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 3.38 times more return on investment than Erste Group. However, NorAm Drilling is 3.38 times more volatile than Erste Group Bank. It trades about 0.22 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.07 per unit of risk. If you would invest 242.00 in NorAm Drilling AS on November 3, 2024 and sell it today you would earn a total of 51.00 from holding NorAm Drilling AS or generate 21.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Erste Group Bank
Performance |
| Timeline |
| NorAm Drilling AS |
| Erste Group Bank |
NorAm Drilling and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Erste Group
The main advantage of trading using opposite NorAm Drilling and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| NorAm Drilling vs. Chiba Bank | NorAm Drilling vs. REVO INSURANCE SPA | NorAm Drilling vs. United Natural Foods | NorAm Drilling vs. Axfood AB |
| Erste Group vs. RCS MediaGroup SpA | Erste Group vs. BRIT AMER TOBACCO | Erste Group vs. TRAINLINE PLC LS | Erste Group vs. Hollywood Bowl Group |
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 CEOs Directory module to screen CEOs from public companies around the world.
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