Correlation Between NorAm Drilling and Postal Savings

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

Diversification Opportunities for NorAm Drilling and Postal Savings

0.25

Correlation Coefficient

NorAm Drilling  Postal Savings

Modest diversification

The 3 months correlation between NorAm and Postal is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Postal Savings go up and down completely randomly.

Pair Corralation between NorAm Drilling and Postal Savings

Assuming the 90 days trading horizon NorAm Drilling is expected to generate 2.93 times less return on investment than Postal Savings. In addition to that, NorAm Drilling is 1.06 times more volatile than Postal Savings Bank. It trades about 0.03 of its total potential returns per unit of risk. Postal Savings Bank is currently generating about 0.09 per unit of volatility. If you would invest  55.00  in Postal Savings Bank on December 29, 2024 and sell it today you would earn a total of  5.00  from holding Postal Savings Bank or generate 9.09% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Postal Savings Bank

NorAm Drilling AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NorAm Drilling is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Postal Savings Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Postal Savings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NorAm Drilling and Postal Savings

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

The idea behind NorAm Drilling AS and Postal Savings Bank 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 Transaction History module to view history of all your transactions and understand their impact on performance.