Correlation Between NorAm Drilling and Hufvudstaden
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Hufvudstaden 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 Hufvudstaden 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 Hufvudstaden AB, you can compare the effects of market volatilities on NorAm Drilling and Hufvudstaden 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 Hufvudstaden. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Hufvudstaden.
Diversification Opportunities for NorAm Drilling and Hufvudstaden
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NorAm and Hufvudstaden is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB 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 Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Hufvudstaden go up and down completely randomly.
Pair Corralation between NorAm Drilling and Hufvudstaden
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 2.42 times more return on investment than Hufvudstaden. However, NorAm Drilling is 2.42 times more volatile than Hufvudstaden AB. It trades about 0.15 of its potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.17 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Hufvudstaden AB
Performance |
| Timeline |
| NorAm Drilling AS |
| Hufvudstaden AB |
NorAm Drilling and Hufvudstaden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Hufvudstaden
The main advantage of trading using opposite NorAm Drilling and Hufvudstaden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Hufvudstaden 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 Hufvudstaden will offset losses from the drop in Hufvudstaden's long position.| NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc |
| Hufvudstaden vs. NorAm Drilling AS | Hufvudstaden vs. Pembina Pipeline Corp | Hufvudstaden vs. EEDUCATION ALBERT AB | Hufvudstaden vs. GigaMedia |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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