Correlation Between NorAm Drilling and Onxeo SA

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

Diversification Opportunities for NorAm Drilling and Onxeo SA

0.38

Correlation Coefficient

NorAm Drilling  Onxeo SA

Weak diversification

The 3 months correlation between NorAm and Onxeo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Onxeo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onxeo SA 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 Onxeo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onxeo SA has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Onxeo SA go up and down completely randomly.

Pair Corralation between NorAm Drilling and Onxeo SA

Assuming the 90 days horizon NorAm Drilling AS is expected to generate 1.35 times more return on investment than Onxeo SA. However, NorAm Drilling is 1.35 times more volatile than Onxeo SA. It trades about 0.06 of its potential returns per unit of risk. Onxeo SA is currently generating about 0.02 per unit of risk. If you would invest  108.00  in NorAm Drilling AS on September 19, 2024 and sell it today you would earn a total of  171.00  from holding NorAm Drilling AS or generate 158.33% 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.  Onxeo SA

NorAm Drilling AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorAm Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Onxeo SA

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with NorAm Drilling and Onxeo SA

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

The idea behind NorAm Drilling AS and Onxeo SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.