Correlation Between NorAm Drilling and Lendlease

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

Diversification Opportunities for NorAm Drilling and Lendlease

0.28

Correlation Coefficient

NorAm Drilling  Lendlease

Modest diversification

The 3 months correlation between NorAm and Lendlease is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Lendlease go up and down completely randomly.

Pair Corralation between NorAm Drilling and Lendlease

Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 1.39 times more return on investment than Lendlease. However, NorAm Drilling is 1.39 times more volatile than Lendlease Group. It trades about 0.1 of its potential returns per unit of risk. Lendlease Group is currently generating about -0.03 per unit of risk. If you would invest  248.00  in NorAm Drilling AS on December 22, 2024 and sell it today you would earn a total of  29.00  from holding NorAm Drilling AS or generate 11.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

NorAm Drilling AS  vs.  Lendlease Group

NorAm Drilling AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 7 (%) 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.

Lendlease Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lendlease 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 Lendlease

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

The idea behind NorAm Drilling AS and Lendlease Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..