Correlation Between Norsk Hydro and Phillips
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Phillips 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 Phillips 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 Phillips 66, you can compare the effects of market volatilities on Norsk Hydro and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Phillips.
Diversification Opportunities for Norsk Hydro and Phillips
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Phillips is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Phillips go up and down completely randomly.
Pair Corralation between Norsk Hydro and Phillips
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.31 times more return on investment than Phillips. However, Norsk Hydro is 1.31 times more volatile than Phillips 66. It trades about 0.09 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.03 per unit of risk. If you would invest 479.00 in Norsk Hydro ASA on December 10, 2024 and sell it today you would earn a total of 122.00 from holding Norsk Hydro ASA or generate 25.47% 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. Phillips 66
Performance |
| Timeline |
| Norsk Hydro ASA |
| Phillips 66 |
Norsk Hydro and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Phillips
The main advantage of trading using opposite Norsk Hydro and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| Norsk Hydro vs. TOREX SEMICONDUCTOR LTD | Norsk Hydro vs. QLEANAIR AB SK 50 | Norsk Hydro vs. Hua Hong Semiconductor | Norsk Hydro vs. MYFAIR GOLD P |
| Phillips vs. ZINC MEDIA GR | Phillips vs. Southern Cross Media | Phillips vs. Axway Software SA | Phillips vs. Ubisoft Entertainment SA |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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