Correlation Between NorAm Drilling and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Meli Hotels 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 Meli Hotels 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 Meli Hotels International, you can compare the effects of market volatilities on NorAm Drilling and Meli Hotels 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 Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Meli Hotels.
Diversification Opportunities for NorAm Drilling and Meli Hotels
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and Meli is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International 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 Meli Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Meli Hotels go up and down completely randomly.
Pair Corralation between NorAm Drilling and Meli Hotels
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Meli Hotels. In addition to that, NorAm Drilling is 2.36 times more volatile than Meli Hotels International. It trades about 0.0 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.15 per unit of volatility. If you would invest 650.00 in Meli Hotels International on September 15, 2024 and sell it today you would earn a total of 106.00 from holding Meli Hotels International or generate 16.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NorAm Drilling AS vs. Meli Hotels International
Performance |
Timeline |
NorAm Drilling AS |
Meli Hotels International |
NorAm Drilling and Meli Hotels Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NorAm Drilling and Meli Hotels
The main advantage of trading using opposite NorAm Drilling and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Meli Hotels 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 Meli Hotels will offset losses from the drop in Meli Hotels' long position.NorAm Drilling vs. American Public Education | ||
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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