Correlation Between NorAm Drilling and Mitsui Fudosan

Can any of the company-specific risk be diversified away by investing in both NorAm Drilling and Mitsui Fudosan 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 Mitsui Fudosan 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 Mitsui Fudosan Co, you can compare the effects of market volatilities on NorAm Drilling and Mitsui Fudosan 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 Mitsui Fudosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Mitsui Fudosan.

Diversification Opportunities for NorAm Drilling and Mitsui Fudosan

0.73

Correlation Coefficient

NorAm Drilling  Mitsui Fudosan

Poor diversification

The 3 months correlation between NorAm and Mitsui is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Mitsui Fudosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Fudosan 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 Mitsui Fudosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Fudosan has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Mitsui Fudosan go up and down completely randomly.

Pair Corralation between NorAm Drilling and Mitsui Fudosan

Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the Mitsui Fudosan. In addition to that, NorAm Drilling is 4.09 times more volatile than Mitsui Fudosan Co. It trades about -0.04 of its total potential returns per unit of risk. Mitsui Fudosan Co is currently generating about -0.07 per unit of volatility. If you would invest  785.00  in Mitsui Fudosan Co on October 5, 2024 and sell it today you would lose (15.00) from holding Mitsui Fudosan Co or give up 1.91% of portfolio value over 90 days.

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

NorAm Drilling AS  vs.  Mitsui Fudosan Co

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.

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Fudosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NorAm Drilling and Mitsui Fudosan

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

The idea behind NorAm Drilling AS and Mitsui Fudosan Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.