Correlation Between NorAm Drilling and Xplora Technologies

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

Diversification Opportunities for NorAm Drilling and Xplora Technologies

-0.67

Correlation Coefficient

NorAm Drilling  Xplora Technologies

Excellent diversification

The 3 months correlation between NorAm and Xplora is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Xplora Technologies As in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xplora Technologies 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 Xplora Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xplora Technologies has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Xplora Technologies go up and down completely randomly.

Pair Corralation between NorAm Drilling and Xplora Technologies

Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the Xplora Technologies. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.97 times less risky than Xplora Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Xplora Technologies As is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Xplora Technologies As on September 14, 2024 and sell it today you would earn a total of  2,250  from holding Xplora Technologies As or generate 227.27% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Xplora Technologies As

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 very healthy basic indicators, NorAm Drilling is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Xplora Technologies

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xplora Technologies As are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Xplora Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NorAm Drilling and Xplora Technologies

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

The idea behind NorAm Drilling AS and Xplora Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.