Correlation Between Macys and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Macys 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 Macys and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and NorAm Drilling AS, you can compare the effects of market volatilities on Macys 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 Macys with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and NorAm Drilling.
Diversification Opportunities for Macys and NorAm Drilling
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Macys and NorAm is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc 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 Macys 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 Macys Inc 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 Macys i.e., Macys and NorAm Drilling go up and down completely randomly.
Pair Corralation between Macys and NorAm Drilling
Assuming the 90 days horizon Macys is expected to generate 1168.5 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Macys Inc is 3.63 times less risky than NorAm Drilling. It trades about 0.0 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 99.00 in NorAm Drilling AS on September 1, 2024 and sell it today you would earn a total of 186.00 from holding NorAm Drilling AS or generate 187.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macys Inc vs. NorAm Drilling AS
Performance |
| Timeline |
| Macys Inc |
| NorAm Drilling AS |
Macys and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macys and NorAm Drilling
The main advantage of trading using opposite Macys and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys 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.The idea behind Macys Inc and NorAm Drilling AS 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.| NorAm Drilling vs. Martin Marietta Materials | NorAm Drilling vs. Reinsurance Group of | NorAm Drilling vs. ZURICH INSURANCE GROUP | NorAm Drilling vs. LIFENET INSURANCE CO |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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