Correlation Between NorAm Drilling and Mercedes-Benz Group
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Mercedes-Benz 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 Mercedes-Benz 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 Mercedes Benz Group AG, you can compare the effects of market volatilities on NorAm Drilling and Mercedes-Benz 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 Mercedes-Benz Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Mercedes-Benz Group.
Diversification Opportunities for NorAm Drilling and Mercedes-Benz Group
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NorAm and Mercedes-Benz is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz 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 Mercedes-Benz Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Mercedes-Benz Group go up and down completely randomly.
Pair Corralation between NorAm Drilling and Mercedes-Benz Group
Assuming the 90 days horizon NorAm Drilling AS is expected to generate 3.54 times more return on investment than Mercedes-Benz Group. However, NorAm Drilling is 3.54 times more volatile than Mercedes Benz Group AG. It trades about 0.02 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.02 per unit of risk. If you would invest 304.00 in NorAm Drilling AS on September 4, 2024 and sell it today you would lose (14.00) from holding NorAm Drilling AS or give up 4.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Mercedes Benz Group AG
Performance |
| Timeline |
| NorAm Drilling AS |
| Mercedes Benz Group |
NorAm Drilling and Mercedes-Benz Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Mercedes-Benz Group
The main advantage of trading using opposite NorAm Drilling and Mercedes-Benz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Mercedes-Benz 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 Mercedes-Benz Group will offset losses from the drop in Mercedes-Benz Group's long position.| NorAm Drilling vs. AUTO TRADER ADR | NorAm Drilling vs. IDP EDUCATION LTD | NorAm Drilling vs. Perdoceo Education | NorAm Drilling vs. Strategic Education |
| Mercedes-Benz Group vs. Moderna | Mercedes-Benz Group vs. BioNTech SE | Mercedes-Benz Group vs. Superior Plus Corp | Mercedes-Benz Group vs. NMI Holdings |
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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