Correlation Between NorAm Drilling and China Railway
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and China Railway 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 China Railway 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 China Railway Group, you can compare the effects of market volatilities on NorAm Drilling and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and China Railway.
Diversification Opportunities for NorAm Drilling and China Railway
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between NorAm and China is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and China Railway go up and down completely randomly.
Pair Corralation between NorAm Drilling and China Railway
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 3.22 times more return on investment than China Railway. However, NorAm Drilling is 3.22 times more volatile than China Railway Group. It trades about 0.03 of its potential returns per unit of risk. China Railway Group is currently generating about -0.04 per unit of risk. If you would invest 277.00 in NorAm Drilling AS on December 28, 2024 and sell it today you would lose (1.00) from holding NorAm Drilling AS or give up 0.36% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NorAm Drilling AS vs. China Railway Group
Performance |
Timeline |
NorAm Drilling AS |
China Railway Group |
NorAm Drilling and China Railway Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NorAm Drilling and China Railway
The main advantage of trading using opposite NorAm Drilling and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.NorAm Drilling vs. UNITED UTILITIES GR | NorAm Drilling vs. FAST RETAIL ADR | NorAm Drilling vs. Costco Wholesale Corp | NorAm Drilling vs. JIAHUA STORES |
China Railway vs. Nordic Semiconductor ASA | China Railway vs. ATOSS SOFTWARE | China Railway vs. CyberArk Software | China Railway vs. PSI Software AG |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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