Correlation Between NorAm Drilling and T-Mobile

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

Diversification Opportunities for NorAm Drilling and T-Mobile

0.25

Correlation Coefficient

NorAm Drilling  T-Mobile

Modest diversification

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

Pair Corralation between NorAm Drilling and T-Mobile

Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 2.84 times more return on investment than T-Mobile. However, NorAm Drilling is 2.84 times more volatile than T Mobile. It trades about 0.46 of its potential returns per unit of risk. T Mobile is currently generating about -0.02 per unit of risk. If you would invest  220.00  in NorAm Drilling AS on October 23, 2024 and sell it today you would earn a total of  85.00  from holding NorAm Drilling AS or generate 38.64% 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.  T Mobile

NorAm Drilling AS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 11 (%) 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.

T Mobile

Risk-Adjusted Performance

3 of 100

Insignificant

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

The main advantage of trading using opposite NorAm Drilling and T-Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, T-Mobile 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 T-Mobile will offset losses from the drop in T-Mobile's long position.

The idea behind NorAm Drilling AS and T Mobile 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.