Correlation Between NACCO Industries and Borr Drilling

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

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

Diversification Opportunities for NACCO Industries and Borr Drilling

-0.78

Correlation Coefficient

NACCO Industries  Borr Drilling

Pay attention - limited upside

The 3 months correlation between NACCO and Borr is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding NACCO Industries and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling and NACCO Industries 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 NACCO Industries are associated (or correlated) with Borr Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borr Drilling has no effect on the direction of NACCO Industries i.e., NACCO Industries and Borr Drilling go up and down completely randomly.

Pair Corralation between NACCO Industries and Borr Drilling

Allowing for the 90-day total investment horizon NACCO Industries is expected to under-perform the Borr Drilling. But the stock apears to be less risky and, when comparing its historical volatility, NACCO Industries is 2.09 times less risky than Borr Drilling. The stock trades about -0.32 of its potential returns per unit of risk. The Borr Drilling is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Borr Drilling on September 27, 2024 and sell it today you would earn a total of  8.00  from holding Borr Drilling or generate 2.21% return on investment over 90 days.

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

NACCO Industries  vs.  Borr Drilling

NACCO Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NACCO Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, NACCO Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NACCO Industries and Borr Drilling

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

The idea behind NACCO Industries and Borr Drilling 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.