Correlation Between Burlington Stores and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Burlington Stores and Norsk Hydro 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 Burlington Stores and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burlington Stores and Norsk Hydro ASA, you can compare the effects of market volatilities on Burlington Stores and Norsk Hydro 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 Burlington Stores with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and Norsk Hydro.
Diversification Opportunities for Burlington Stores and Norsk Hydro
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Burlington and Norsk is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA and Burlington Stores 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 Burlington Stores are associated (or correlated) with Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Burlington Stores i.e., Burlington Stores and Norsk Hydro go up and down completely randomly.
Pair Corralation between Burlington Stores and Norsk Hydro
Assuming the 90 days trading horizon Burlington Stores is expected to generate 3.06 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, Burlington Stores is 1.32 times less risky than Norsk Hydro. It trades about 0.07 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 545.00 in Norsk Hydro ASA on November 2, 2024 and sell it today you would earn a total of 41.00 from holding Norsk Hydro ASA or generate 7.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Burlington Stores vs. Norsk Hydro ASA
Performance |
| Timeline |
| Burlington Stores |
| Norsk Hydro ASA |
Burlington Stores and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burlington Stores and Norsk Hydro
The main advantage of trading using opposite Burlington Stores and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Burlington Stores vs. CarsalesCom | Burlington Stores vs. Carsales | Burlington Stores vs. Entravision Communications | Burlington Stores vs. GEELY AUTOMOBILE |
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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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