Correlation Between NORDIC MINING and SOCAM DEVELOPMENT

Can any of the company-specific risk be diversified away by investing in both NORDIC MINING and SOCAM DEVELOPMENT 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 NORDIC MINING and SOCAM DEVELOPMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NORDIC MINING ASA and SOCAM DEVELOPMENT LTD, you can compare the effects of market volatilities on NORDIC MINING and SOCAM DEVELOPMENT 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 NORDIC MINING with a short position of SOCAM DEVELOPMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORDIC MINING and SOCAM DEVELOPMENT.

Diversification Opportunities for NORDIC MINING and SOCAM DEVELOPMENT

-0.53

Correlation Coefficient

NORDIC MINING  SOCAM DEVELOPMENT

Excellent diversification

The 3 months correlation between NORDIC and SOCAM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding NORDIC MINING ASA and SOCAM DEVELOPMENT LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOCAM DEVELOPMENT LTD and NORDIC MINING 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 NORDIC MINING ASA are associated (or correlated) with SOCAM DEVELOPMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOCAM DEVELOPMENT LTD has no effect on the direction of NORDIC MINING i.e., NORDIC MINING and SOCAM DEVELOPMENT go up and down completely randomly.

Pair Corralation between NORDIC MINING and SOCAM DEVELOPMENT

Assuming the 90 days horizon NORDIC MINING ASA is expected to generate 0.91 times more return on investment than SOCAM DEVELOPMENT. However, NORDIC MINING ASA is 1.1 times less risky than SOCAM DEVELOPMENT. It trades about 0.1 of its potential returns per unit of risk. SOCAM DEVELOPMENT LTD is currently generating about -0.09 per unit of risk. If you would invest  168.00  in NORDIC MINING ASA on February 7, 2024 and sell it today you would earn a total of  9.00  from holding NORDIC MINING ASA or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

NORDIC MINING ASA  vs.  SOCAM DEVELOPMENT LTD

NORDIC MINING ASA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NORDIC MINING ASA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NORDIC MINING reported solid returns over the last few months and may actually be approaching a breakup point.

SOCAM DEVELOPMENT LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SOCAM DEVELOPMENT LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOCAM DEVELOPMENT reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NORDIC MINING and SOCAM DEVELOPMENT

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

The idea behind NORDIC MINING ASA and SOCAM DEVELOPMENT 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.