Correlation Between NorAm Drilling and SHELF DRILLING

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

Diversification Opportunities for NorAm Drilling and SHELF DRILLING

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between NorAm and SHELF is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and SHELF DRILLING LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELF DRILLING LTD 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 SHELF DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHELF DRILLING LTD has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and SHELF DRILLING go up and down completely randomly.

Pair Corralation between NorAm Drilling and SHELF DRILLING

Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the SHELF DRILLING. But the stock apears to be less risky and, when comparing its historical volatility, NorAm Drilling AS is 1.82 times less risky than SHELF DRILLING. The stock trades about -0.14 of its potential returns per unit of risk. The SHELF DRILLING LTD is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  42.00  in SHELF DRILLING LTD on April 4, 2025 and sell it today you would earn a total of  28.00  from holding SHELF DRILLING LTD or generate 66.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.39%
ValuesDaily Returns

NorAm Drilling AS  vs.  SHELF DRILLING LTD

 Performance 
       Timeline  
NorAm Drilling AS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
SHELF DRILLING LTD 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SHELF DRILLING LTD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SHELF DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

NorAm Drilling and SHELF DRILLING Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NorAm Drilling and SHELF DRILLING

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

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