Correlation Between Sea1 Offshore and NorAm Drilling

Can any of the company-specific risk be diversified away by investing in both Sea1 Offshore 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 Sea1 Offshore and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sea1 Offshore and NorAm Drilling AS, you can compare the effects of market volatilities on Sea1 Offshore 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 Sea1 Offshore with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea1 Offshore and NorAm Drilling.

Diversification Opportunities for Sea1 Offshore and NorAm Drilling

0.46

Correlation Coefficient

Sea1 Offshore  NorAm Drilling

Very weak diversification

The 3 months correlation between Sea1 and NorAm is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sea1 Offshore 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 Sea1 Offshore 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 Sea1 Offshore 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 Sea1 Offshore i.e., Sea1 Offshore and NorAm Drilling go up and down completely randomly.

Pair Corralation between Sea1 Offshore and NorAm Drilling

Assuming the 90 days trading horizon Sea1 Offshore is expected to generate 1.55 times more return on investment than NorAm Drilling. However, Sea1 Offshore is 1.55 times more volatile than NorAm Drilling AS. It trades about 0.02 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.03 per unit of risk. If you would invest  2,366  in Sea1 Offshore on September 24, 2024 and sell it today you would earn a total of  49.00  from holding Sea1 Offshore or generate 2.07% return on investment over 90 days.

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

Sea1 Offshore  vs.  NorAm Drilling AS

Sea1 Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sea1 Offshore 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.

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.

Pair Trading with Sea1 Offshore and NorAm Drilling

The main advantage of trading using opposite Sea1 Offshore and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea1 Offshore 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.

The idea behind Sea1 Offshore and NorAm 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.