Correlation Between NorAm Drilling and METTLER TOLEDO

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

Diversification Opportunities for NorAm Drilling and METTLER TOLEDO

-0.56

Correlation Coefficient

NorAm Drilling  METTLER TOLEDO

Excellent diversification

The 3 months correlation between NorAm and METTLER is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and METTLER TOLEDO INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METTLER TOLEDO INTL 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 METTLER TOLEDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METTLER TOLEDO INTL has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and METTLER TOLEDO go up and down completely randomly.

Pair Corralation between NorAm Drilling and METTLER TOLEDO

Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 2.04 times more return on investment than METTLER TOLEDO. However, NorAm Drilling is 2.04 times more volatile than METTLER TOLEDO INTL. It trades about 0.16 of its potential returns per unit of risk. METTLER TOLEDO INTL is currently generating about -0.07 per unit of risk. If you would invest  201.00  in NorAm Drilling AS on September 3, 2024 and sell it today you would earn a total of  87.00  from holding NorAm Drilling AS or generate 43.28% return on investment over 90 days.

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

NorAm Drilling AS  vs.  METTLER TOLEDO INTL

NorAm Drilling AS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NorAm Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

METTLER TOLEDO INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days METTLER TOLEDO INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NorAm Drilling and METTLER TOLEDO

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

The idea behind NorAm Drilling AS and METTLER TOLEDO INTL 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.