Correlation Between Walmart and NorAm Drilling

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

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

Diversification Opportunities for Walmart and NorAm Drilling

0.33

Correlation Coefficient

Walmart  NorAm Drilling

Weak diversification

The 3 months correlation between Walmart and NorAm is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Walmart 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 Walmart 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 Walmart 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 Walmart i.e., Walmart and NorAm Drilling go up and down completely randomly.

Pair Corralation between Walmart and NorAm Drilling

Assuming the 90 days trading horizon Walmart is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 3.81 times less risky than NorAm Drilling. The stock trades about -0.09 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  277.00  in NorAm Drilling AS on December 30, 2024 and sell it today you would lose (5.00) from holding NorAm Drilling AS or give up 1.81% of portfolio value over 90 days.

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

Walmart  vs.  NorAm Drilling AS

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Despite nearly fragile basic indicators, NorAm Drilling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Walmart and NorAm Drilling

The main advantage of trading using opposite Walmart and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.