Correlation Between Norsk Hydro and Linde Plc
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Linde Plc 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 Linde Plc 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 Linde plc, you can compare the effects of market volatilities on Norsk Hydro and Linde Plc 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 Linde Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Linde Plc.
Diversification Opportunities for Norsk Hydro and Linde Plc
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Linde is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Linde Plc go up and down completely randomly.
Pair Corralation between Norsk Hydro and Linde Plc
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.49 times less return on investment than Linde Plc. In addition to that, Norsk Hydro is 2.26 times more volatile than Linde plc. It trades about 0.09 of its total potential returns per unit of risk. Linde plc is currently generating about 0.31 per unit of volatility. If you would invest 41,960 in Linde plc on November 28, 2024 and sell it today you would earn a total of 2,500 from holding Linde plc or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Linde plc
Performance |
| Timeline |
| Norsk Hydro ASA |
| Linde plc |
Norsk Hydro and Linde Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Linde Plc
The main advantage of trading using opposite Norsk Hydro and Linde Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Linde Plc 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 Linde Plc will offset losses from the drop in Linde Plc's long position.| Norsk Hydro vs. Infrastrutture Wireless Italiane | Norsk Hydro vs. Pembina Pipeline Corp | Norsk Hydro vs. Tower One Wireless | Norsk Hydro vs. PEPTONIC MEDICAL |
| Linde Plc vs. UNITED RENTALS | Linde Plc vs. Virtu Financial | Linde Plc vs. PRINCIPAL FINANCIAL | Linde Plc vs. ALBIS LEASING AG |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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