Correlation Between NorAm Drilling and Starbucks
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Starbucks 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 Starbucks 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 Starbucks, you can compare the effects of market volatilities on NorAm Drilling and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Starbucks.
Diversification Opportunities for NorAm Drilling and Starbucks
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and Starbucks is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Starbucks go up and down completely randomly.
Pair Corralation between NorAm Drilling and Starbucks
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Starbucks. In addition to that, NorAm Drilling is 4.31 times more volatile than Starbucks. It trades about -0.14 of its total potential returns per unit of risk. Starbucks is currently generating about -0.55 per unit of volatility. If you would invest 9,700 in Starbucks on September 24, 2024 and sell it today you would lose (1,272) from holding Starbucks or give up 13.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Starbucks
Performance |
| Timeline |
| NorAm Drilling AS |
| Starbucks |
NorAm Drilling and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Starbucks
The main advantage of trading using opposite NorAm Drilling and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| NorAm Drilling vs. COVIVIO HOTELS INH | NorAm Drilling vs. AM EAGLE OUTFITTERS | NorAm Drilling vs. HYATT HOTELS A | NorAm Drilling vs. Sunstone Hotel Investors |
| Starbucks vs. McDonalds | Starbucks vs. Starbucks | Starbucks vs. Compass Group PLC | Starbucks vs. Yum Brands |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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