Correlation Between COLUMBIA SPORTSWEAR and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COLUMBIA SPORTSWEAR and Norsk Hydro ASA, you can compare the effects of market volatilities on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of COLUMBIA SPORTSWEAR and Norsk Hydro.
Diversification Opportunities for COLUMBIA SPORTSWEAR and Norsk Hydro
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between COLUMBIA and Norsk is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR i.e., COLUMBIA SPORTSWEAR and Norsk Hydro go up and down completely randomly.
Pair Corralation between COLUMBIA SPORTSWEAR and Norsk Hydro
Assuming the 90 days trading horizon COLUMBIA SPORTSWEAR is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, COLUMBIA SPORTSWEAR is 2.22 times less risky than Norsk Hydro. The stock trades about 0.0 of its potential returns per unit of risk. The Norsk Hydro ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 638.00 in Norsk Hydro ASA on August 25, 2024 and sell it today you would lose (43.00) from holding Norsk Hydro ASA or give up 6.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COLUMBIA SPORTSWEAR vs. Norsk Hydro ASA
Performance |
| Timeline |
| COLUMBIA SPORTSWEAR |
| Norsk Hydro ASA |
COLUMBIA SPORTSWEAR and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COLUMBIA SPORTSWEAR and Norsk Hydro
The main advantage of trading using opposite COLUMBIA SPORTSWEAR and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COLUMBIA SPORTSWEAR 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.The idea behind COLUMBIA SPORTSWEAR and Norsk Hydro ASA 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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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 Stocks Directory module to find actively traded stocks across global markets.
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