Correlation Between Norsk Hydro and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Emerson Electric 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 Emerson Electric 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 Emerson Electric Co, you can compare the effects of market volatilities on Norsk Hydro and Emerson Electric 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 Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Emerson Electric.
Diversification Opportunities for Norsk Hydro and Emerson Electric
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Emerson is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Emerson Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Emerson Electric go up and down completely randomly.
Pair Corralation between Norsk Hydro and Emerson Electric
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.45 times less return on investment than Emerson Electric. In addition to that, Norsk Hydro is 1.23 times more volatile than Emerson Electric Co. It trades about 0.12 of its total potential returns per unit of risk. Emerson Electric Co is currently generating about 0.22 per unit of volatility. If you would invest 9,201 in Emerson Electric Co on September 3, 2024 and sell it today you would earn a total of 3,375 from holding Emerson Electric Co or generate 36.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Emerson Electric Co
Performance |
| Timeline |
| Norsk Hydro ASA |
| Emerson Electric |
Norsk Hydro and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Emerson Electric
The main advantage of trading using opposite Norsk Hydro and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Emerson Electric 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 Emerson Electric will offset losses from the drop in Emerson Electric's long position.| Norsk Hydro vs. Apollo Medical Holdings | Norsk Hydro vs. Summit Hotel Properties | Norsk Hydro vs. Park Hotels Resorts | Norsk Hydro vs. MEDICAL FACILITIES NEW |
| Emerson Electric vs. BRIT AMER TOBACCO | Emerson Electric vs. Transport International Holdings | Emerson Electric vs. PARKEN Sport Entertainment | Emerson Electric vs. USWE SPORTS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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