Correlation Between Norsk Hydro and GFL ENVIRONM

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Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and GFL ENVIRONM 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 GFL ENVIRONM 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 GFL ENVIRONM, you can compare the effects of market volatilities on Norsk Hydro and GFL ENVIRONM 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 GFL ENVIRONM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and GFL ENVIRONM.

Diversification Opportunities for Norsk Hydro and GFL ENVIRONM

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Norsk and GFL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and GFL ENVIRONM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL ENVIRONM 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 GFL ENVIRONM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFL ENVIRONM has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and GFL ENVIRONM go up and down completely randomly.

Pair Corralation between Norsk Hydro and GFL ENVIRONM

Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.27 times less return on investment than GFL ENVIRONM. In addition to that, Norsk Hydro is 1.56 times more volatile than GFL ENVIRONM. It trades about 0.05 of its total potential returns per unit of risk. GFL ENVIRONM is currently generating about 0.11 per unit of volatility. If you would invest  4,140  in GFL ENVIRONM on September 13, 2024 and sell it today you would earn a total of  160.00  from holding GFL ENVIRONM or generate 3.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Norsk Hydro ASA  vs.  GFL ENVIRONM

 Performance 
       Timeline  
Norsk Hydro ASA 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Norsk Hydro reported solid returns over the last few months and may actually be approaching a breakup point.
GFL ENVIRONM 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in GFL ENVIRONM are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GFL ENVIRONM reported solid returns over the last few months and may actually be approaching a breakup point.

Norsk Hydro and GFL ENVIRONM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norsk Hydro and GFL ENVIRONM

The main advantage of trading using opposite Norsk Hydro and GFL ENVIRONM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, GFL ENVIRONM 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 GFL ENVIRONM will offset losses from the drop in GFL ENVIRONM's long position.
The idea behind Norsk Hydro ASA and GFL ENVIRONM 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.
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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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