Correlation Between NorAm Drilling and Marubeni

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

Diversification Opportunities for NorAm Drilling and Marubeni

0.47

Correlation Coefficient

NorAm Drilling  Marubeni

Very weak diversification

The 3 months correlation between NorAm and Marubeni is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Marubeni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni 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 Marubeni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Marubeni go up and down completely randomly.

Pair Corralation between NorAm Drilling and Marubeni

Assuming the 90 days horizon NorAm Drilling AS is expected to generate 5.24 times more return on investment than Marubeni. However, NorAm Drilling is 5.24 times more volatile than Marubeni. It trades about 0.06 of its potential returns per unit of risk. Marubeni is currently generating about 0.04 per unit of risk. If you would invest  101.00  in NorAm Drilling AS on September 12, 2024 and sell it today you would earn a total of  194.00  from holding NorAm Drilling AS or generate 192.08% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Marubeni

NorAm Drilling AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NorAm Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Marubeni

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marubeni is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NorAm Drilling and Marubeni

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

The idea behind NorAm Drilling AS and Marubeni 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..