Correlation Between NorAm Drilling and China Communications
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and China Communications 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 Communications 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 Communications Construction, you can compare the effects of market volatilities on NorAm Drilling and China Communications 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 Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and China Communications.
Diversification Opportunities for NorAm Drilling and China Communications
-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 Communications Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and China Communications go up and down completely randomly.
Pair Corralation between NorAm Drilling and China Communications
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 4.16 times more return on investment than China Communications. However, NorAm Drilling is 4.16 times more volatile than China Communications Construction. It trades about 0.03 of its potential returns per unit of risk. China Communications Construction is currently generating about -0.09 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 | 98.39% |
Values | Daily Returns |
NorAm Drilling AS vs. China Communications Construct
Performance |
Timeline |
NorAm Drilling AS |
China Communications |
NorAm Drilling and China Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NorAm Drilling and China Communications
The main advantage of trading using opposite NorAm Drilling and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, China Communications 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 Communications will offset losses from the drop in China Communications' 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 Communications vs. ADRIATIC METALS LS 013355 | China Communications vs. China Datang | China Communications vs. Nippon Light Metal | China Communications vs. Transport International Holdings |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume |