Correlation Between NorAm Drilling and TUI AG

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

Diversification Opportunities for NorAm Drilling and TUI AG

0.31

Correlation Coefficient

NorAm Drilling  TUI AG

Weak diversification

The 3 months correlation between NorAm and TUI is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI AG 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 TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and TUI AG go up and down completely randomly.

Pair Corralation between NorAm Drilling and TUI AG

Assuming the 90 days trading horizon NorAm Drilling AS is expected to generate 0.6 times more return on investment than TUI AG. However, NorAm Drilling AS is 1.66 times less risky than TUI AG. It trades about 0.03 of its potential returns per unit of risk. TUI AG is currently generating about -0.11 per unit of risk. If you would invest  268.00  in NorAm Drilling AS on December 30, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

NorAm Drilling AS  vs.  TUI AG

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

TUI AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days TUI AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NorAm Drilling and TUI AG

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

The idea behind NorAm Drilling AS and TUI AG 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.