Correlation Between NorAm Drilling and LOANDEPOT INC

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

Diversification Opportunities for NorAm Drilling and LOANDEPOT INC

0.24

Correlation Coefficient

NorAm Drilling  LOANDEPOT INC

Modest diversification

The 3 months correlation between NorAm and LOANDEPOT is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and LOANDEPOT INC A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOANDEPOT INC A 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 LOANDEPOT INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOANDEPOT INC A has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and LOANDEPOT INC go up and down completely randomly.

Pair Corralation between NorAm Drilling and LOANDEPOT INC

Assuming the 90 days horizon NorAm Drilling AS is expected to generate 2.12 times more return on investment than LOANDEPOT INC. However, NorAm Drilling is 2.12 times more volatile than LOANDEPOT INC A. It trades about -0.04 of its potential returns per unit of risk. LOANDEPOT INC A is currently generating about -0.45 per unit of risk. If you would invest  297.00  in NorAm Drilling AS on October 5, 2024 and sell it today you would lose (20.00) from holding NorAm Drilling AS or give up 6.73% of portfolio value over 90 days.

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

NorAm Drilling AS  vs.  LOANDEPOT INC A

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LOANDEPOT INC A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOANDEPOT INC A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LOANDEPOT INC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NorAm Drilling and LOANDEPOT INC

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

The idea behind NorAm Drilling AS and LOANDEPOT INC A 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.