Correlation Between Awilco Drilling and BlueNord ASA

Can any of the company-specific risk be diversified away by investing in both Awilco Drilling and BlueNord ASA 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 Awilco Drilling and BlueNord ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Awilco Drilling PLC and BlueNord ASA, you can compare the effects of market volatilities on Awilco Drilling and BlueNord ASA 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 Awilco Drilling with a short position of BlueNord ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awilco Drilling and BlueNord ASA.

Diversification Opportunities for Awilco Drilling and BlueNord ASA

0.11

Correlation Coefficient

Awilco Drilling  BlueNord ASA

Average diversification

The 3 months correlation between Awilco and BlueNord is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Awilco Drilling PLC and BlueNord ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueNord ASA and Awilco 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 Awilco Drilling PLC are associated (or correlated) with BlueNord ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueNord ASA has no effect on the direction of Awilco Drilling i.e., Awilco Drilling and BlueNord ASA go up and down completely randomly.

Pair Corralation between Awilco Drilling and BlueNord ASA

Assuming the 90 days trading horizon Awilco Drilling PLC is expected to generate 8.14 times more return on investment than BlueNord ASA. However, Awilco Drilling is 8.14 times more volatile than BlueNord ASA. It trades about 0.03 of its potential returns per unit of risk. BlueNord ASA is currently generating about 0.08 per unit of risk. If you would invest  3,300  in Awilco Drilling PLC on October 7, 2024 and sell it today you would lose (1,080) from holding Awilco Drilling PLC or give up 32.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Awilco Drilling PLC  vs.  BlueNord ASA

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Awilco Drilling is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BlueNord ASA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlueNord ASA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, BlueNord ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Awilco Drilling and BlueNord ASA

The main advantage of trading using opposite Awilco Drilling and BlueNord ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awilco Drilling position performs unexpectedly, BlueNord ASA 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 BlueNord ASA will offset losses from the drop in BlueNord ASA's long position.

The idea behind Awilco Drilling PLC and BlueNord ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.