Correlation Between NorAm Drilling and Alphabet

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

Diversification Opportunities for NorAm Drilling and Alphabet

-0.7

Correlation Coefficient

NorAm Drilling  Alphabet

Excellent diversification

The 3 months correlation between NorAm and Alphabet is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Alphabet go up and down completely randomly.

Pair Corralation between NorAm Drilling and Alphabet

Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Alphabet. In addition to that, NorAm Drilling is 2.57 times more volatile than Alphabet. It trades about -0.05 of its total potential returns per unit of risk. Alphabet is currently generating about 0.22 per unit of volatility. If you would invest  14,666  in Alphabet on September 20, 2024 and sell it today you would earn a total of  4,128  from holding Alphabet or generate 28.15% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Alphabet

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alphabet

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NorAm Drilling and Alphabet

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

The idea behind NorAm Drilling AS and Alphabet 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.