Correlation Between Norsk Hydro and Starbucks
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Starbucks 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 Starbucks 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 Starbucks, you can compare the effects of market volatilities on Norsk Hydro and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Starbucks.
Diversification Opportunities for Norsk Hydro and Starbucks
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Norsk and Starbucks is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Starbucks go up and down completely randomly.
Pair Corralation between Norsk Hydro and Starbucks
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Starbucks. In addition to that, Norsk Hydro is 1.02 times more volatile than Starbucks. It trades about -0.62 of its total potential returns per unit of risk. Starbucks is currently generating about -0.55 per unit of volatility. If you would invest 9,700 in Starbucks on September 24, 2024 and sell it today you would lose (1,272) from holding Starbucks or give up 13.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Starbucks
Performance |
| Timeline |
| Norsk Hydro ASA |
| Starbucks |
Norsk Hydro and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Starbucks
The main advantage of trading using opposite Norsk Hydro and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| Norsk Hydro vs. Norsk Hydro ASA | Norsk Hydro vs. Alcoa Corp | Norsk Hydro vs. AMAG Austria Metall | Norsk Hydro vs. Kaiser Aluminum |
| Starbucks vs. McDonalds | Starbucks vs. Starbucks | Starbucks vs. Compass Group PLC | Starbucks vs. Yum Brands |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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