Correlation Between NorAm Drilling and Macquarie Group
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Macquarie Group 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 Macquarie Group 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 Macquarie Group Limited, you can compare the effects of market volatilities on NorAm Drilling and Macquarie Group 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 Macquarie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Macquarie Group.
Diversification Opportunities for NorAm Drilling and Macquarie Group
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NorAm and Macquarie is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Macquarie Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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 Macquarie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Macquarie Group go up and down completely randomly.
Pair Corralation between NorAm Drilling and Macquarie Group
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 6.92 times more return on investment than Macquarie Group. However, NorAm Drilling is 6.92 times more volatile than Macquarie Group Limited. It trades about 0.07 of its potential returns per unit of risk. Macquarie Group Limited is currently generating about 0.06 per unit of risk. If you would invest 81.00 in NorAm Drilling AS on August 29, 2024 and sell it today you would earn a total of 217.00 from holding NorAm Drilling AS or generate 267.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Macquarie Group Limited
Performance |
| Timeline |
| NorAm Drilling AS |
| Macquarie Group |
NorAm Drilling and Macquarie Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Macquarie Group
The main advantage of trading using opposite NorAm Drilling and Macquarie Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Macquarie Group 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 Macquarie Group will offset losses from the drop in Macquarie Group's long position.| NorAm Drilling vs. Air Transport Services | NorAm Drilling vs. Pembina Pipeline Corp | NorAm Drilling vs. NAKED WINES PLC | NorAm Drilling vs. Fukuyama Transporting Co |
| Macquarie Group vs. MSCI Inc | Macquarie Group vs. Superior Plus Corp | Macquarie Group vs. NMI Holdings | Macquarie Group vs. Origin Agritech |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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