Correlation Between NorAm Drilling and Vow Green

Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Vow Green 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 Vow Green 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 Vow Green Metals, you can compare the effects of market volatilities on NorAm Drilling and Vow Green 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 Vow Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Vow Green.

Diversification Opportunities for NorAm Drilling and Vow Green

0.24

Correlation Coefficient

NorAm Drilling  Vow Green

Modest diversification

The 3 months correlation between NorAm and Vow is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Vow Green Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow Green Metals 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 Vow Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow Green Metals has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Vow Green go up and down completely randomly.

Pair Corralation between NorAm Drilling and Vow Green

Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the Vow Green. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 3.03 times less risky than Vow Green. The stock trades about -0.2 of its potential returns per unit of risk. The Vow Green Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  67.00  in Vow Green Metals on September 20, 2024 and sell it today you would earn a total of  3.00  from holding Vow Green Metals or generate 4.48% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Vow Green Metals

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 conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vow Green Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vow Green Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Vow Green may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NorAm Drilling and Vow Green

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

The idea behind NorAm Drilling AS and Vow Green Metals 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 Valuation module to check real value of public entities based on technical and fundamental data.