Correlation Between Lendlease and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Lendlease 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 Lendlease and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lendlease Group and Norsk Hydro ASA, you can compare the effects of market volatilities on Lendlease 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 Lendlease with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lendlease and Norsk Hydro.
Diversification Opportunities for Lendlease and Norsk Hydro
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lendlease and Norsk is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group 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 Lendlease 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 Lendlease Group 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 Lendlease i.e., Lendlease and Norsk Hydro go up and down completely randomly.
Pair Corralation between Lendlease and Norsk Hydro
Assuming the 90 days trading horizon Lendlease is expected to generate 4.17 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, Lendlease Group is 1.48 times less risky than Norsk Hydro. It trades about 0.0 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 607.00 in Norsk Hydro ASA on September 14, 2024 and sell it today you would lose (52.00) from holding Norsk Hydro ASA or give up 8.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lendlease Group vs. Norsk Hydro ASA
Performance |
| Timeline |
| Lendlease Group |
| Norsk Hydro ASA |
Lendlease and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lendlease and Norsk Hydro
The main advantage of trading using opposite Lendlease and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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 Lendlease Group 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.| Norsk Hydro vs. CVR Medical Corp | Norsk Hydro vs. National Beverage Corp | Norsk Hydro vs. Lendlease Group | Norsk Hydro vs. ALBIS LEASING AG |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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