Correlation Between Norsk Hydro and LG Display
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and LG Display 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 LG Display 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 LG Display Co, you can compare the effects of market volatilities on Norsk Hydro and LG Display 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 LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and LG Display.
Diversification Opportunities for Norsk Hydro and LG Display
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norsk and LGA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display 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 LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and LG Display go up and down completely randomly.
Pair Corralation between Norsk Hydro and LG Display
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.49 times more return on investment than LG Display. However, Norsk Hydro is 1.49 times more volatile than LG Display Co. It trades about 0.03 of its potential returns per unit of risk. LG Display Co is currently generating about -0.03 per unit of risk. If you would invest 432.00 in Norsk Hydro ASA on September 19, 2024 and sell it today you would earn a total of 117.00 from holding Norsk Hydro ASA or generate 27.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. LG Display Co
Performance |
| Timeline |
| Norsk Hydro ASA |
| LG Display |
Norsk Hydro and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and LG Display
The main advantage of trading using opposite Norsk Hydro and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.| Norsk Hydro vs. T MOBILE US | Norsk Hydro vs. PT Ace Hardware | Norsk Hydro vs. Align Technology | Norsk Hydro vs. SMA Solar Technology |
| LG Display vs. Samsung Electronics Co | LG Display vs. Superior Plus Corp | LG Display vs. SIVERS SEMICONDUCTORS AB | LG Display 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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