Correlation Between Lowes Companies and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and NorAm Drilling AS, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and NorAm Drilling.
Diversification Opportunities for Lowes Companies and NorAm Drilling
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lowes and NorAm is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies 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 Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and NorAm Drilling go up and down completely randomly.
Pair Corralation between Lowes Companies and NorAm Drilling
Assuming the 90 days horizon Lowes Companies is expected to generate 0.41 times more return on investment than NorAm Drilling. However, Lowes Companies is 2.45 times less risky than NorAm Drilling. It trades about 0.12 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 22,695 in Lowes Companies on September 14, 2024 and sell it today you would earn a total of 2,845 from holding Lowes Companies or generate 12.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Lowes Companies vs. NorAm Drilling AS
Performance |
Timeline |
Lowes Companies |
NorAm Drilling AS |
Lowes Companies and NorAm Drilling Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lowes Companies and NorAm Drilling
The main advantage of trading using opposite Lowes Companies and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.Lowes Companies vs. ASSOC BR FOODS | Lowes Companies vs. SENECA FOODS A | Lowes Companies vs. Addus HomeCare | Lowes Companies vs. Aedas Homes SA |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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