Correlation Between NorAm Drilling and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS, you can compare the effects of market volatilities on NorAm Drilling and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and STMICROELECTRONICS.
Diversification Opportunities for NorAm Drilling and STMICROELECTRONICS
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between NorAm and STMICROELECTRONICS is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between NorAm Drilling and STMICROELECTRONICS
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 1.97 times more return on investment than STMICROELECTRONICS. However, NorAm Drilling is 1.97 times more volatile than STMICROELECTRONICS. It trades about 0.31 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.06 per unit of risk. If you would invest 238.00 in NorAm Drilling AS on October 29, 2024 and sell it today you would earn a total of 67.00 from holding NorAm Drilling AS or generate 28.15% 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. STMICROELECTRONICS
Performance |
| Timeline |
| NorAm Drilling AS |
| STMICROELECTRONICS |
NorAm Drilling and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and STMICROELECTRONICS
The main advantage of trading using opposite NorAm Drilling and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| NorAm Drilling vs. STRAYER EDUCATION | NorAm Drilling vs. PennantPark Investment | NorAm Drilling vs. Laureate Education | NorAm Drilling vs. New Residential Investment |
| STMICROELECTRONICS vs. Corsair Gaming | STMICROELECTRONICS vs. Mitsui Chemicals | STMICROELECTRONICS vs. KINGBOARD CHEMICAL | STMICROELECTRONICS vs. AIR PRODCHEMICALS |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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