Correlation Between NorAm Drilling and NH HOTEL
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and NH HOTEL 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 NH HOTEL 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 NH HOTEL GROUP, you can compare the effects of market volatilities on NorAm Drilling and NH HOTEL 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 NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and NH HOTEL.
Diversification Opportunities for NorAm Drilling and NH HOTEL
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorAm and NH5 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and NH HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH HOTEL 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 NH HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH HOTEL GROUP has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and NH HOTEL go up and down completely randomly.
Pair Corralation between NorAm Drilling and NH HOTEL
Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 1.34 times more return on investment than NH HOTEL. However, NorAm Drilling is 1.34 times more volatile than NH HOTEL GROUP. It trades about 0.17 of its potential returns per unit of risk. NH HOTEL GROUP is currently generating about -0.01 per unit of risk. If you would invest 152.00 in NorAm Drilling AS on August 25, 2024 and sell it today you would earn a total of 162.00 from holding NorAm Drilling AS or generate 106.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. NH HOTEL GROUP
Performance |
| Timeline |
| NorAm Drilling AS |
| NH HOTEL GROUP |
NorAm Drilling and NH HOTEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and NH HOTEL
The main advantage of trading using opposite NorAm Drilling and NH HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling position performs unexpectedly, NH HOTEL 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 NH HOTEL will offset losses from the drop in NH HOTEL's long position.| NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc | NorAm Drilling vs. Apple Inc |
| NH HOTEL vs. The City of | NH HOTEL vs. BORR DRILLING NEW | NH HOTEL vs. Cogent Communications Holdings | NH HOTEL vs. NorAm Drilling AS |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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