Correlation Between Mizuho Financial and NorAm Drilling

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

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

Diversification Opportunities for Mizuho Financial and NorAm Drilling

-0.42

Correlation Coefficient

Mizuho Financial  NorAm Drilling

Very good diversification

The 3 months correlation between Mizuho and NorAm is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mizuho Financial Group 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 Mizuho Financial 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 Mizuho Financial Group 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 Mizuho Financial i.e., Mizuho Financial and NorAm Drilling go up and down completely randomly.

Pair Corralation between Mizuho Financial and NorAm Drilling

Assuming the 90 days trading horizon Mizuho Financial Group is expected to generate 0.31 times more return on investment than NorAm Drilling. However, Mizuho Financial Group is 3.24 times less risky than NorAm Drilling. It trades about 0.22 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.02 per unit of risk. If you would invest  408.00  in Mizuho Financial Group on October 7, 2024 and sell it today you would earn a total of  60.00  from holding Mizuho Financial Group or generate 14.71% return on investment over 90 days.

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

Mizuho Financial Group  vs.  NorAm Drilling AS

Mizuho Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuho Financial Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mizuho Financial reported solid returns over the last few months and may actually be approaching a breakup point.

NorAm Drilling AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorAm Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mizuho Financial and NorAm Drilling

The main advantage of trading using opposite Mizuho Financial and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mizuho Financial 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 Mizuho Financial Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.