Correlation Between Nordic American and Williams Companies

Can any of the company-specific risk be diversified away by investing in both Nordic American and Williams Companies 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 Nordic American and Williams Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nordic American Tankers and Williams Companies, you can compare the effects of market volatilities on Nordic American and Williams Companies 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 Nordic American with a short position of Williams Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic American and Williams Companies.

Diversification Opportunities for Nordic American and Williams Companies

0.56

Correlation Coefficient

Nordic American  Williams Companies

Very weak diversification

The 3 months correlation between Nordic and Williams is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Williams Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Companies and Nordic American 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 Nordic American Tankers are associated (or correlated) with Williams Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Companies has no effect on the direction of Nordic American i.e., Nordic American and Williams Companies go up and down completely randomly.

Pair Corralation between Nordic American and Williams Companies

Considering the 90-day investment horizon Nordic American Tankers is expected to under-perform the Williams Companies. In addition to that, Nordic American is 1.08 times more volatile than Williams Companies. It trades about -0.01 of its total potential returns per unit of risk. Williams Companies is currently generating about -0.01 per unit of volatility. If you would invest  5,802  in Williams Companies on November 29, 2024 and sell it today you would lose (112.00) from holding Williams Companies or give up 1.93% of portfolio value over 90 days.

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

Nordic American Tankers  vs.  Williams Companies

Nordic American Tankers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nordic American Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nordic American is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Williams Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Williams Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Williams Companies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordic American and Williams Companies

The main advantage of trading using opposite Nordic American and Williams Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic American position performs unexpectedly, Williams Companies 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 Williams Companies will offset losses from the drop in Williams Companies' long position.

The idea behind Nordic American Tankers and Williams Companies 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.