Correlation Between Napatech and Dolphin Drilling

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

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

Diversification Opportunities for Napatech and Dolphin Drilling

-0.42

Correlation Coefficient

Napatech  Dolphin Drilling

Very good diversification

The 3 months correlation between Napatech and Dolphin is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and Dolphin Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Drilling and Napatech 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 Napatech AS are associated (or correlated) with Dolphin Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Drilling has no effect on the direction of Napatech i.e., Napatech and Dolphin Drilling go up and down completely randomly.

Pair Corralation between Napatech and Dolphin Drilling

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the Dolphin Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Napatech AS is 1.42 times less risky than Dolphin Drilling. The stock trades about -0.19 of its potential returns per unit of risk. The Dolphin Drilling AS is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  390.00  in Dolphin Drilling AS on September 5, 2024 and sell it today you would lose (45.00) from holding Dolphin Drilling AS or give up 11.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Napatech AS  vs.  Dolphin Drilling AS

Napatech AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Dolphin Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolphin Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Napatech and Dolphin Drilling

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

The idea behind Napatech AS and Dolphin 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.