Correlation Between Orsted AS and Northland Power
Can any of the company-specific risk be diversified away by investing in both Orsted AS and Northland Power 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 Orsted AS and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orsted AS and Northland Power, you can compare the effects of market volatilities on Orsted AS and Northland Power 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 Orsted AS with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted AS and Northland Power.
Diversification Opportunities for Orsted AS and Northland Power
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orsted and Northland is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and Orsted AS 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 Orsted AS are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Orsted AS i.e., Orsted AS and Northland Power go up and down completely randomly.
Pair Corralation between Orsted AS and Northland Power
Assuming the 90 days horizon Orsted AS is expected to generate 0.8 times more return on investment than Northland Power. However, Orsted AS is 1.25 times less risky than Northland Power. It trades about 0.03 of its potential returns per unit of risk. Northland Power is currently generating about 0.0 per unit of risk. If you would invest 4,287 in Orsted AS on September 14, 2024 and sell it today you would earn a total of 397.00 from holding Orsted AS or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orsted AS vs. Northland Power
Performance |
| Timeline |
| Orsted AS |
| Northland Power |
Orsted AS and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orsted AS and Northland Power
The main advantage of trading using opposite Orsted AS and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted AS position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Orsted AS vs. COFCO Joycome Foods | Orsted AS vs. FORWARD AIR P | Orsted AS vs. Corsair Gaming | Orsted AS vs. TYSON FOODS A |
| Northland Power vs. Dairy Farm International | Northland Power vs. SIEM OFFSHORE NEW | Northland Power vs. Martin Marietta Materials | Northland Power vs. Rayonier Advanced Materials |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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