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

0.33

Correlation Coefficient

NorAm Drilling  NH HOTEL

Weak diversification

The 3 months correlation between NorAm and NH5 is 0.33. 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 2.16 times more return on investment than NH HOTEL. However, NorAm Drilling is 2.16 times more volatile than NH HOTEL GROUP. It trades about 0.06 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  264.00  in NorAm Drilling AS on December 26, 2024 and sell it today you would earn a total of  16.00  from holding NorAm Drilling AS or generate 6.06% return on investment over 90 days.

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

NorAm Drilling AS  vs.  NH HOTEL GROUP

NorAm Drilling AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NorAm Drilling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NH HOTEL GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days NH HOTEL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NH HOTEL 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 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.

The idea behind NorAm Drilling AS and NH HOTEL GROUP 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.