Correlation Between BW OFFSHORE and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both BW OFFSHORE 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 BW OFFSHORE and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW OFFSHORE LTD and NorAm Drilling AS, you can compare the effects of market volatilities on BW OFFSHORE 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 BW OFFSHORE with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW OFFSHORE and NorAm Drilling.
Diversification Opportunities for BW OFFSHORE and NorAm Drilling
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between XY81 and NorAm is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD 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 BW OFFSHORE 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 BW OFFSHORE LTD 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 BW OFFSHORE i.e., BW OFFSHORE and NorAm Drilling go up and down completely randomly.
Pair Corralation between BW OFFSHORE and NorAm Drilling
Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 0.28 times more return on investment than NorAm Drilling. However, BW OFFSHORE LTD is 3.6 times less risky than NorAm Drilling. It trades about 0.2 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.04 per unit of risk. If you would invest 254.00 in BW OFFSHORE LTD on November 27, 2024 and sell it today you would earn a total of 16.00 from holding BW OFFSHORE LTD or generate 6.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW OFFSHORE LTD vs. NorAm Drilling AS
Performance |
| Timeline |
| BW OFFSHORE LTD |
| NorAm Drilling AS |
BW OFFSHORE and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW OFFSHORE and NorAm Drilling
The main advantage of trading using opposite BW OFFSHORE and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW OFFSHORE 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.| BW OFFSHORE vs. FAST RETAIL ADR | BW OFFSHORE vs. FLOW TRADERS LTD | BW OFFSHORE vs. Caseys General Stores | BW OFFSHORE vs. TRADEGATE |
| NorAm Drilling vs. Cairo Communication SpA | NorAm Drilling vs. COREBRIDGE FINANCIAL INC | NorAm Drilling vs. CITIC Telecom International | NorAm Drilling vs. China Telecom |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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