Correlation Between Vow Green and NorAm Drilling

Can any of the company-specific risk be diversified away by investing in both Vow Green and NorAm Drilling 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 Vow Green and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vow Green Metals and NorAm Drilling AS, you can compare the effects of market volatilities on Vow Green and NorAm Drilling 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 Vow Green with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vow Green and NorAm Drilling.

Diversification Opportunities for Vow Green and NorAm Drilling

0.81

Correlation Coefficient

Vow Green  NorAm Drilling

Very poor diversification

The 3 months correlation between Vow and NorAm is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vow Green Metals and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS and Vow Green 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 Vow Green Metals are associated (or correlated) with NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Vow Green i.e., Vow Green and NorAm Drilling go up and down completely randomly.

Pair Corralation between Vow Green and NorAm Drilling

Assuming the 90 days trading horizon Vow Green Metals is expected to generate 4.51 times more return on investment than NorAm Drilling. However, Vow Green is 4.51 times more volatile than NorAm Drilling AS. It trades about 0.12 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.01 per unit of risk. If you would invest  68.00  in Vow Green Metals on December 26, 2024 and sell it today you would earn a total of  36.00  from holding Vow Green Metals or generate 52.94% return on investment over 90 days.

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

Vow Green Metals  vs.  NorAm Drilling AS

Vow Green Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vow Green Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Vow Green disclosed solid returns over the last few months and may actually be approaching a breakup point.

NorAm Drilling AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days NorAm Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, NorAm Drilling is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vow Green and NorAm Drilling

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

The idea behind Vow Green Metals and NorAm Drilling AS 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.