Correlation Between NorAm Drilling and Instabank ASA

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

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

Diversification Opportunities for NorAm Drilling and Instabank ASA

-0.37

Correlation Coefficient

NorAm Drilling  Instabank ASA

Very good diversification

The 3 months correlation between NorAm and Instabank is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Instabank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Instabank ASA and NorAm Drilling 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 NorAm Drilling AS are associated (or correlated) with Instabank ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Instabank ASA has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Instabank ASA go up and down completely randomly.

Pair Corralation between NorAm Drilling and Instabank ASA

Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the Instabank ASA. In addition to that, NorAm Drilling is 1.06 times more volatile than Instabank ASA. It trades about -0.08 of its total potential returns per unit of risk. Instabank ASA is currently generating about 0.03 per unit of volatility. If you would invest  195.00  in Instabank ASA on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Instabank ASA or generate 2.56% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Instabank ASA

NorAm Drilling AS

Risk-Adjusted Performance

0 of 100

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 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.

Instabank ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Instabank ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Instabank ASA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NorAm Drilling and Instabank ASA

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

The idea behind NorAm Drilling AS and Instabank ASA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.