Correlation Between Genco Shipping and NorAm Drilling

Can any of the company-specific risk be diversified away by investing in both Genco Shipping 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 Genco Shipping and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genco Shipping Trading and NorAm Drilling AS, you can compare the effects of market volatilities on Genco Shipping 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 Genco Shipping with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genco Shipping and NorAm Drilling.

Diversification Opportunities for Genco Shipping and NorAm Drilling

0.55

Correlation Coefficient

Genco Shipping  NorAm Drilling

Very weak diversification

The 3 months correlation between Genco and NorAm is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Genco Shipping Trading 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 Genco Shipping 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 Genco Shipping Trading 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 Genco Shipping i.e., Genco Shipping and NorAm Drilling go up and down completely randomly.

Pair Corralation between Genco Shipping and NorAm Drilling

Assuming the 90 days trading horizon Genco Shipping Trading is expected to under-perform the NorAm Drilling. In addition to that, Genco Shipping is 1.23 times more volatile than NorAm Drilling AS. It trades about -0.01 of its total potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.03 per unit of volatility. If you would invest  268.00  in NorAm Drilling AS on December 29, 2024 and sell it today you would earn a total of  6.00  from holding NorAm Drilling AS or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Genco Shipping Trading  vs.  NorAm Drilling AS

Genco Shipping Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genco Shipping is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

NorAm Drilling AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NorAm Drilling is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Genco Shipping and NorAm Drilling

The main advantage of trading using opposite Genco Shipping and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genco Shipping 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 Genco Shipping Trading 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.