Correlation Between NorAm Drilling and Bloom Energy

Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Bloom Energy 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 Bloom Energy 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 Bloom Energy, you can compare the effects of market volatilities on NorAm Drilling and Bloom Energy 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 Bloom Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Bloom Energy.

Diversification Opportunities for NorAm Drilling and Bloom Energy

0.28

Correlation Coefficient

NorAm Drilling  Bloom Energy

Modest diversification

The 3 months correlation between NorAm and Bloom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Bloom Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloom Energy 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 Bloom Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloom Energy has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Bloom Energy go up and down completely randomly.

Pair Corralation between NorAm Drilling and Bloom Energy

Assuming the 90 days horizon NorAm Drilling AS is expected to generate 1.08 times more return on investment than Bloom Energy. However, NorAm Drilling is 1.08 times more volatile than Bloom Energy. It trades about 0.06 of its potential returns per unit of risk. Bloom Energy is currently generating about 0.03 per unit of risk. If you would invest  248.00  in NorAm Drilling AS on December 20, 2024 and sell it today you would earn a total of  30.00  from holding NorAm Drilling AS or generate 12.1% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Bloom Energy

NorAm Drilling AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NorAm Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Bloom Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Bloom Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NorAm Drilling and Bloom Energy

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

The idea behind NorAm Drilling AS and Bloom Energy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.