Correlation Between Norsk Hydro and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Trane Technologies 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 Trane Technologies 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 Trane Technologies plc, you can compare the effects of market volatilities on Norsk Hydro and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Trane Technologies.
Diversification Opportunities for Norsk Hydro and Trane Technologies
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norsk and Trane is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Trane Technologies go up and down completely randomly.
Pair Corralation between Norsk Hydro and Trane Technologies
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 2.02 times less return on investment than Trane Technologies. In addition to that, Norsk Hydro is 2.18 times more volatile than Trane Technologies plc. It trades about 0.02 of its total potential returns per unit of risk. Trane Technologies plc is currently generating about 0.08 per unit of volatility. If you would invest 15,776 in Trane Technologies plc on January 10, 2025 and sell it today you would earn a total of 12,574 from holding Trane Technologies plc or generate 79.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Trane Technologies plc
Performance |
| Timeline |
| Norsk Hydro ASA |
| Trane Technologies plc |
Norsk Hydro and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Trane Technologies
The main advantage of trading using opposite Norsk Hydro and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.| Norsk Hydro vs. Norsk Hydro ASA | Norsk Hydro vs. Alcoa Corp | Norsk Hydro vs. AMAG Austria Metall | Norsk Hydro vs. Kaiser Aluminum |
| Trane Technologies vs. VIENNA INSURANCE GR | Trane Technologies vs. Sligro Food Group | Trane Technologies vs. SLIGRO FOOD GROUP | Trane Technologies vs. Japan Post Insurance |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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