Correlation Between Dupont De and NorAm Drilling

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

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

Diversification Opportunities for Dupont De and NorAm Drilling

0.12

Correlation Coefficient

Dupont De  NorAm Drilling

Average diversification

The 3 months correlation between Dupont and NorAm is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and NorAm Drilling go up and down completely randomly.

Pair Corralation between Dupont De and NorAm Drilling

Assuming the 90 days trading horizon Dupont De Nemours is expected to generate 0.34 times more return on investment than NorAm Drilling. However, Dupont De Nemours is 2.94 times less risky than NorAm Drilling. It trades about 0.05 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.0 per unit of risk. If you would invest  7,335  in Dupont De Nemours on September 12, 2024 and sell it today you would earn a total of  665.00  from holding Dupont De Nemours or generate 9.07% return on investment over 90 days.

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

Dupont De Nemours  vs.  NorAm Drilling AS

Dupont De Nemours

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dupont De may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NorAm Drilling AS

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NorAm Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and NorAm Drilling

The main advantage of trading using opposite Dupont De and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.