Correlation Between NorAm Drilling and Apple

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

Diversification Opportunities for NorAm Drilling and Apple

0.8

Correlation Coefficient

NorAm Drilling  Apple

Very poor diversification

The 3 months correlation between NorAm and Apple is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Apple go up and down completely randomly.

Pair Corralation between NorAm Drilling and Apple

Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 2.87 times more return on investment than Apple. However, NorAm Drilling is 2.87 times more volatile than Apple Inc. It trades about 0.14 of its potential returns per unit of risk. Apple Inc is currently generating about 0.19 per unit of risk. If you would invest  263.00  in NorAm Drilling AS on August 31, 2024 and sell it today you would earn a total of  28.00  from holding NorAm Drilling AS or generate 10.65% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Apple Inc

NorAm Drilling AS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NorAm Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with NorAm Drilling and Apple

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

The idea behind NorAm Drilling AS and Apple Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.