Correlation Between Major Drilling and NORWEGIAN AIR
Can any of the company-specific risk be diversified away by investing in both Major Drilling and NORWEGIAN AIR 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 Major Drilling and NORWEGIAN AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Major Drilling Group and NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on Major Drilling and NORWEGIAN AIR 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 Major Drilling with a short position of NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and NORWEGIAN AIR.
Diversification Opportunities for Major Drilling and NORWEGIAN AIR
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Major and NORWEGIAN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT and Major 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 Major Drilling Group are associated (or correlated) with NORWEGIAN AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORWEGIAN AIR SHUT has no effect on the direction of Major Drilling i.e., Major Drilling and NORWEGIAN AIR go up and down completely randomly.
Pair Corralation between Major Drilling and NORWEGIAN AIR
Assuming the 90 days horizon Major Drilling Group is expected to under-perform the NORWEGIAN AIR. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.07 times less risky than NORWEGIAN AIR. The stock trades about -0.1 of its potential returns per unit of risk. The NORWEGIAN AIR SHUT is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 94.00 in NORWEGIAN AIR SHUT on September 22, 2024 and sell it today you would lose (2.00) from holding NORWEGIAN AIR SHUT or give up 2.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. NORWEGIAN AIR SHUT
Performance |
| Timeline |
| Major Drilling Group |
| NORWEGIAN AIR SHUT |
Major Drilling and NORWEGIAN AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and NORWEGIAN AIR
The main advantage of trading using opposite Major Drilling and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, NORWEGIAN AIR 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 NORWEGIAN AIR will offset losses from the drop in NORWEGIAN AIR's long position.| Major Drilling vs. BHP Group Limited | Major Drilling vs. BHP Group Limited | Major Drilling vs. Rio Tinto Group | Major Drilling vs. Rio Tinto Group |
| NORWEGIAN AIR vs. Fukuyama Transporting Co | NORWEGIAN AIR vs. QUEEN S ROAD | NORWEGIAN AIR vs. COPLAND ROAD CAPITAL | NORWEGIAN AIR vs. TEXAS ROADHOUSE |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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