Correlation Between Northland Power and Orsted AS
Can any of the company-specific risk be diversified away by investing in both Northland Power and Orsted AS 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 Northland Power and Orsted AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northland Power and Orsted AS, you can compare the effects of market volatilities on Northland Power and Orsted AS 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 Northland Power with a short position of Orsted AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and Orsted AS.
Diversification Opportunities for Northland Power and Orsted AS
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northland and Orsted is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS and Northland Power 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 Northland Power are associated (or correlated) with Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS has no effect on the direction of Northland Power i.e., Northland Power and Orsted AS go up and down completely randomly.
Pair Corralation between Northland Power and Orsted AS
Assuming the 90 days horizon Northland Power is expected to under-perform the Orsted AS. But the stock apears to be less risky and, when comparing its historical volatility, Northland Power is 1.13 times less risky than Orsted AS. The stock trades about -0.03 of its potential returns per unit of risk. The Orsted AS is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 6,903 in Orsted AS on October 14, 2024 and sell it today you would lose (2,883) from holding Orsted AS or give up 41.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northland Power vs. Orsted AS
Performance |
| Timeline |
| Northland Power |
| Orsted AS |
Northland Power and Orsted AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northland Power and Orsted AS
The main advantage of trading using opposite Northland Power and Orsted AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, Orsted AS 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 Orsted AS will offset losses from the drop in Orsted AS's long position.| Northland Power vs. Power Assets Holdings | Northland Power vs. Superior Plus Corp | Northland Power vs. NMI Holdings | Northland Power vs. SIVERS SEMICONDUCTORS AB |
| Orsted AS vs. Tradeweb Markets | Orsted AS vs. Canon Marketing Japan | Orsted AS vs. SIDETRADE EO 1 | Orsted AS vs. TRADELINK ELECTRON |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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