Correlation Between Norsk Hydro and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical, you can compare the effects of market volatilities on Norsk Hydro and Westlake Chemical 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 Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Westlake Chemical.
Diversification Opportunities for Norsk Hydro and Westlake Chemical
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norsk and Westlake is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Westlake Chemical go up and down completely randomly.
Pair Corralation between Norsk Hydro and Westlake Chemical
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.86 times more return on investment than Westlake Chemical. However, Norsk Hydro is 1.86 times more volatile than Westlake Chemical. It trades about -0.02 of its potential returns per unit of risk. Westlake Chemical is currently generating about -0.19 per unit of risk. If you would invest 591.00 in Norsk Hydro ASA on September 13, 2024 and sell it today you would lose (19.00) from holding Norsk Hydro ASA or give up 3.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Westlake Chemical
Performance |
| Timeline |
| Norsk Hydro ASA |
| Westlake Chemical |
Norsk Hydro and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Westlake Chemical
The main advantage of trading using opposite Norsk Hydro and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Westlake Chemical 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 Westlake Chemical will offset losses from the drop in Westlake Chemical's long position.| Norsk Hydro vs. Goosehead Insurance | Norsk Hydro vs. RETAIL FOOD GROUP | Norsk Hydro vs. COSTCO WHOLESALE CDR | Norsk Hydro vs. SBI Insurance Group |
| Westlake Chemical vs. Albemarle | Westlake Chemical vs. Superior Plus Corp | Westlake Chemical vs. SIVERS SEMICONDUCTORS AB | Westlake Chemical 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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