Correlation Between NorAm Drilling and Corporate Office

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

Diversification Opportunities for NorAm Drilling and Corporate Office

0.79

Correlation Coefficient

NorAm Drilling  Corporate Office

Poor diversification

The 3 months correlation between NorAm and Corporate is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Corporate Office go up and down completely randomly.

Pair Corralation between NorAm Drilling and Corporate Office

Assuming the 90 days trading horizon NorAm Drilling AS is expected to under-perform the Corporate Office. In addition to that, NorAm Drilling is 1.42 times more volatile than Corporate Office Properties. It trades about -0.24 of its total potential returns per unit of risk. Corporate Office Properties is currently generating about -0.21 per unit of volatility. If you would invest  2,650  in Corporate Office Properties on January 13, 2025 and sell it today you would lose (410.00) from holding Corporate Office Properties or give up 15.47% of portfolio value over 90 days.

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

NorAm Drilling AS  vs.  Corporate Office Properties

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

Corporate Office Pro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NorAm Drilling and Corporate Office

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

The idea behind NorAm Drilling AS and Corporate Office Properties 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.