Correlation Between NorAm Drilling and AS Latvijas

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

Diversification Opportunities for NorAm Drilling and AS Latvijas

-0.6

Correlation Coefficient

NorAm Drilling  AS Latvijas

Excellent diversification

The 3 months correlation between NorAm and UM9 is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and AS Latvijas balzams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AS Latvijas balzams 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 AS Latvijas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AS Latvijas balzams has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and AS Latvijas go up and down completely randomly.

Pair Corralation between NorAm Drilling and AS Latvijas

Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the AS Latvijas. In addition to that, NorAm Drilling is 31.1 times more volatile than AS Latvijas balzams. It trades about -0.14 of its total potential returns per unit of risk. AS Latvijas balzams is currently generating about -0.31 per unit of volatility. If you would invest  915.00  in AS Latvijas balzams on September 22, 2024 and sell it today you would lose (10.00) from holding AS Latvijas balzams or give up 1.09% 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.  AS Latvijas balzams

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

AS Latvijas balzams

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AS Latvijas balzams are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AS Latvijas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NorAm Drilling and AS Latvijas

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

The idea behind NorAm Drilling AS and AS Latvijas balzams 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.