Correlation Between MERCEDES-BENZ GRP and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both MERCEDES-BENZ GRP 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 MERCEDES-BENZ GRP and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MERCEDES BENZ GRP ADR14 and Norsk Hydro ASA, you can compare the effects of market volatilities on MERCEDES-BENZ GRP 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 MERCEDES-BENZ GRP with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCEDES-BENZ GRP and Norsk Hydro.
Diversification Opportunities for MERCEDES-BENZ GRP and Norsk Hydro
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MERCEDES-BENZ and Norsk is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding MERCEDES BENZ GRP ADR14 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 MERCEDES-BENZ GRP 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 MERCEDES BENZ GRP ADR14 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 MERCEDES-BENZ GRP i.e., MERCEDES-BENZ GRP and Norsk Hydro go up and down completely randomly.
Pair Corralation between MERCEDES-BENZ GRP and Norsk Hydro
Assuming the 90 days trading horizon MERCEDES BENZ GRP ADR14 is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, MERCEDES BENZ GRP ADR14 is 1.84 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 0.07 of returns per unit of risk over similar time horizon. If you would invest 301.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of 287.00 from holding Norsk Hydro ASA or generate 95.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MERCEDES BENZ GRP ADR14 vs. Norsk Hydro ASA
Performance |
| Timeline |
| MERCEDES BENZ GRP |
| Norsk Hydro ASA |
MERCEDES-BENZ GRP and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MERCEDES-BENZ GRP and Norsk Hydro
The main advantage of trading using opposite MERCEDES-BENZ GRP and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCEDES-BENZ GRP 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.| MERCEDES-BENZ GRP vs. DiamondRock Hospitality | MERCEDES-BENZ GRP vs. COFCO Joycome Foods | MERCEDES-BENZ GRP vs. Lifeway Foods | MERCEDES-BENZ GRP vs. Perseus Mining Limited |
| Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB |
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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