Correlation Between MERCEDES-BENZ GRP and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both MERCEDES-BENZ GRP and NorAm 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 MERCEDES-BENZ GRP and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MERCEDES BENZ GRP ADR14 and NorAm Drilling AS, you can compare the effects of market volatilities on MERCEDES-BENZ GRP and NorAm 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 MERCEDES-BENZ GRP with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCEDES-BENZ GRP and NorAm Drilling.
Diversification Opportunities for MERCEDES-BENZ GRP and NorAm Drilling
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MERCEDES-BENZ and NorAm is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding MERCEDES BENZ GRP ADR14 and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS and MERCEDES-BENZ GRP 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 MERCEDES BENZ GRP ADR14 are associated (or correlated) with NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of MERCEDES-BENZ GRP i.e., MERCEDES-BENZ GRP and NorAm Drilling go up and down completely randomly.
Pair Corralation between MERCEDES-BENZ GRP and NorAm Drilling
Assuming the 90 days trading horizon MERCEDES BENZ GRP ADR14 is expected to generate 0.48 times more return on investment than NorAm Drilling. However, MERCEDES BENZ GRP ADR14 is 2.08 times less risky than NorAm Drilling. It trades about 0.08 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.02 per unit of risk. If you would invest 1,310 in MERCEDES BENZ GRP ADR14 on September 12, 2024 and sell it today you would earn a total of 50.00 from holding MERCEDES BENZ GRP ADR14 or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MERCEDES BENZ GRP ADR14 vs. NorAm Drilling AS
Performance |
| Timeline |
| MERCEDES BENZ GRP |
| NorAm Drilling AS |
MERCEDES-BENZ GRP and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MERCEDES-BENZ GRP and NorAm Drilling
The main advantage of trading using opposite MERCEDES-BENZ GRP and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCEDES-BENZ GRP position performs unexpectedly, NorAm 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| MERCEDES-BENZ GRP vs. DiamondRock Hospitality | MERCEDES-BENZ GRP vs. COFCO Joycome Foods | MERCEDES-BENZ GRP vs. Lifeway Foods | MERCEDES-BENZ GRP vs. Perseus Mining Limited |
| NorAm Drilling vs. ARDAGH METAL PACDL 0001 | NorAm Drilling vs. Performance Food Group | NorAm Drilling vs. INDOFOOD AGRI RES | NorAm Drilling vs. United Natural Foods |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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