Correlation Between NorAm Drilling and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Selective Insurance 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 Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on NorAm Drilling and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Selective Insurance.
Diversification Opportunities for NorAm Drilling and Selective Insurance
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NorAm and Selective is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Selective Insurance go up and down completely randomly.
Pair Corralation between NorAm Drilling and Selective Insurance
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 2.13 times more return on investment than Selective Insurance. However, NorAm Drilling is 2.13 times more volatile than Selective Insurance Group. It trades about -0.06 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.24 per unit of risk. If you would invest 293.00 in NorAm Drilling AS on October 11, 2024 and sell it today you would lose (11.00) from holding NorAm Drilling AS or give up 3.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Selective Insurance Group
Performance |
| Timeline |
| NorAm Drilling AS |
| Selective Insurance |
NorAm Drilling and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Selective Insurance
The main advantage of trading using opposite NorAm Drilling and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| NorAm Drilling vs. Synovus Financial Corp | NorAm Drilling vs. Erste Group Bank | NorAm Drilling vs. AM EAGLE OUTFITTERS | NorAm Drilling vs. Direct Line Insurance |
| Selective Insurance vs. Advanced Medical Solutions | Selective Insurance vs. AWILCO DRILLING PLC | Selective Insurance vs. NorAm Drilling AS | Selective Insurance vs. Tencent Music Entertainment |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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