Correlation Between Norsk Hydro and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Illinois Tool 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 Illinois Tool 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 Illinois Tool Works, you can compare the effects of market volatilities on Norsk Hydro and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Illinois Tool.
Diversification Opportunities for Norsk Hydro and Illinois Tool
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Illinois is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Illinois Tool go up and down completely randomly.
Pair Corralation between Norsk Hydro and Illinois Tool
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 3.86 times more return on investment than Illinois Tool. However, Norsk Hydro is 3.86 times more volatile than Illinois Tool Works. It trades about 0.07 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.07 per unit of risk. If you would invest 301.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of 287.00 from holding Norsk Hydro ASA or generate 95.35% 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. Illinois Tool Works
Performance |
| Timeline |
| Norsk Hydro ASA |
| Illinois Tool Works |
Norsk Hydro and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Illinois Tool
The main advantage of trading using opposite Norsk Hydro and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB |
| Illinois Tool vs. Schneider Electric SE | Illinois Tool vs. Superior Plus Corp | Illinois Tool vs. SIVERS SEMICONDUCTORS AB | Illinois Tool vs. Norsk Hydro ASA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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