Correlation Between Webster Financial and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Webster Financial and NorAm Drilling 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 Webster Financial and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and NorAm Drilling AS, you can compare the effects of market volatilities on Webster Financial and NorAm Drilling 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 Webster Financial with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and NorAm Drilling.
Diversification Opportunities for Webster Financial and NorAm Drilling
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Webster and NorAm is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS and Webster Financial 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 Webster Financial are associated (or correlated) with NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Webster Financial i.e., Webster Financial and NorAm Drilling go up and down completely randomly.
Pair Corralation between Webster Financial and NorAm Drilling
Assuming the 90 days horizon Webster Financial is expected to generate 6.32 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Webster Financial is 2.17 times less risky than NorAm Drilling. It trades about 0.13 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 235.00 in NorAm Drilling AS on October 28, 2024 and sell it today you would earn a total of 81.00 from holding NorAm Drilling AS or generate 34.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Webster Financial vs. NorAm Drilling AS
Performance |
| Timeline |
| Webster Financial |
| NorAm Drilling AS |
Webster Financial and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and NorAm Drilling
The main advantage of trading using opposite Webster Financial and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Webster Financial vs. United States Steel | Webster Financial vs. KOBE STEEL LTD | Webster Financial vs. TOMBADOR IRON LTD | Webster Financial vs. Tianjin Capital Environmental |
| NorAm Drilling vs. CENTURIA OFFICE REIT | NorAm Drilling vs. Addus HomeCare | NorAm Drilling vs. Hisense Home Appliances | NorAm Drilling vs. CAIRN HOMES EO |
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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