Correlation Between NorAm Drilling and Xinhua Winshare

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

Diversification Opportunities for NorAm Drilling and Xinhua Winshare

-0.69

Correlation Coefficient

NorAm Drilling  Xinhua Winshare

Excellent diversification

The 3 months correlation between NorAm and Xinhua is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Xinhua Winshare Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinhua Winshare Publ 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 Xinhua Winshare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinhua Winshare Publ has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Xinhua Winshare go up and down completely randomly.

Pair Corralation between NorAm Drilling and Xinhua Winshare

Assuming the 90 days horizon NorAm Drilling AS is expected to generate 2.86 times more return on investment than Xinhua Winshare. However, NorAm Drilling is 2.86 times more volatile than Xinhua Winshare Publishing. It trades about 0.02 of its potential returns per unit of risk. Xinhua Winshare Publishing is currently generating about 0.04 per unit of risk. If you would invest  311.00  in NorAm Drilling AS on October 20, 2024 and sell it today you would lose (5.00) from holding NorAm Drilling AS or give up 1.61% of portfolio value over 90 days.

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

NorAm Drilling AS  vs.  Xinhua Winshare Publishing

NorAm Drilling AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NorAm Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xinhua Winshare Publ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xinhua Winshare 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 Xinhua Winshare

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

The idea behind NorAm Drilling AS and Xinhua Winshare Publishing 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.