Correlation Between Norsk Hydro and CRH Plc
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and CRH Plc 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 Norsk Hydro and CRH Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norsk Hydro ASA and CRH Plc, you can compare the effects of market volatilities on Norsk Hydro and CRH Plc 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 Norsk Hydro with a short position of CRH Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and CRH Plc.
Diversification Opportunities for Norsk Hydro and CRH Plc
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Norsk and CRH is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and CRH Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH Plc and Norsk Hydro 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 Norsk Hydro ASA are associated (or correlated) with CRH Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRH Plc has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and CRH Plc go up and down completely randomly.
Pair Corralation between Norsk Hydro and CRH Plc
If you would invest 600.00 in Norsk Hydro ASA on August 27, 2024 and sell it today you would earn a total of 62.00 from holding Norsk Hydro ASA or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Norsk Hydro ASA vs. CRH Plc
Performance |
| Timeline |
| Norsk Hydro ASA |
| CRH Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Norsk Hydro and CRH Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and CRH Plc
The main advantage of trading using opposite Norsk Hydro and CRH Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, CRH Plc 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 CRH Plc will offset losses from the drop in CRH Plc's long position.The idea behind Norsk Hydro ASA and CRH Plc 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.| CRH Plc vs. Cementos Pacasmayo SAA | CRH Plc vs. Summit Materials | CRH Plc vs. Eagle Materials | CRH Plc vs. CRH PLC ADR |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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