Correlation Between Norsk Hydro and Trip Group
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Trip Group 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 Trip Group 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 Trip Group Limited, you can compare the effects of market volatilities on Norsk Hydro and Trip Group 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 Trip Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Trip Group.
Diversification Opportunities for Norsk Hydro and Trip Group
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Norsk and Trip is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Trip Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trip Group Limited 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 Trip Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trip Group Limited has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Trip Group go up and down completely randomly.
Pair Corralation between Norsk Hydro and Trip Group
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 18.09 times less return on investment than Trip Group. But when comparing it to its historical volatility, Norsk Hydro ASA is 1.23 times less risky than Trip Group. It trades about 0.01 of its potential returns per unit of risk. Trip Group Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,720 in Trip Group Limited on September 2, 2024 and sell it today you would earn a total of 1,380 from holding Trip Group Limited or generate 29.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Trip Group Limited
Performance |
| Timeline |
| Norsk Hydro ASA |
| Trip Group Limited |
Norsk Hydro and Trip Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Trip Group
The main advantage of trading using opposite Norsk Hydro and Trip Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Trip Group 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 Trip Group will offset losses from the drop in Trip Group's long position.| Norsk Hydro vs. TOREX SEMICONDUCTOR LTD | Norsk Hydro vs. Taiwan Semiconductor Manufacturing | Norsk Hydro vs. United Natural Foods | Norsk Hydro vs. Tyson Foods |
| Trip Group vs. Charter Communications | Trip Group vs. INTERSHOP Communications Aktiengesellschaft | Trip Group vs. WillScot Mobile Mini | Trip Group vs. Iridium Communications |
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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