Correlation Between NorAm Drilling and TEGNA

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

Diversification Opportunities for NorAm Drilling and TEGNA

-0.21

Correlation Coefficient

NorAm Drilling  TEGNA

Very good diversification

The 3 months correlation between NorAm and TEGNA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and TEGNA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEGNA Inc 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 TEGNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEGNA Inc has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and TEGNA go up and down completely randomly.

Pair Corralation between NorAm Drilling and TEGNA

Assuming the 90 days horizon NorAm Drilling is expected to generate 38.01 times less return on investment than TEGNA. In addition to that, NorAm Drilling is 2.29 times more volatile than TEGNA Inc. It trades about 0.0 of its total potential returns per unit of risk. TEGNA Inc is currently generating about 0.26 per unit of volatility. If you would invest  1,238  in TEGNA Inc on September 1, 2024 and sell it today you would earn a total of  532.00  from holding TEGNA Inc or generate 42.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

NorAm Drilling AS  vs.  TEGNA Inc

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 nearly stable basic indicators, NorAm Drilling is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

TEGNA Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TEGNA Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TEGNA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NorAm Drilling and TEGNA

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

The idea behind NorAm Drilling AS and TEGNA Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.