Correlation Between Sogn Sparebank and NorAm Drilling

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

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

Diversification Opportunities for Sogn Sparebank and NorAm Drilling

-0.88

Correlation Coefficient

Sogn Sparebank  NorAm Drilling

Pay attention - limited upside

The 3 months correlation between Sogn and NorAm is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sogn Sparebank 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 Sogn Sparebank 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 Sogn Sparebank 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 Sogn Sparebank i.e., Sogn Sparebank and NorAm Drilling go up and down completely randomly.

Pair Corralation between Sogn Sparebank and NorAm Drilling

Assuming the 90 days trading horizon Sogn Sparebank is expected to generate 1.02 times more return on investment than NorAm Drilling. However, Sogn Sparebank is 1.02 times more volatile than NorAm Drilling AS. It trades about 0.12 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.1 per unit of risk. If you would invest  24,535  in Sogn Sparebank on April 24, 2025 and sell it today you would earn a total of  3,360  from holding Sogn Sparebank or generate 13.69% return on investment over 90 days.

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

Sogn Sparebank  vs.  NorAm Drilling AS

Sogn Sparebank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sogn Sparebank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sogn Sparebank disclosed solid returns over the last few months and may actually be approaching a breakup point.

NorAm Drilling AS

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sogn Sparebank and NorAm Drilling

The main advantage of trading using opposite Sogn Sparebank and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sogn Sparebank 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 Sogn Sparebank 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.