Correlation Between Norsk Hydro and TRAVEL LEISURE
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and TRAVEL LEISURE 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 TRAVEL LEISURE 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 TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Norsk Hydro and TRAVEL LEISURE 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 TRAVEL LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and TRAVEL LEISURE.
Diversification Opportunities for Norsk Hydro and TRAVEL LEISURE
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Norsk and TRAVEL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and TRAVEL LEISURE go up and down completely randomly.
Pair Corralation between Norsk Hydro and TRAVEL LEISURE
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the TRAVEL LEISURE. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 1.07 times less risky than TRAVEL LEISURE. The stock trades about -0.56 of its potential returns per unit of risk. The TRAVEL LEISURE DL 01 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,000 in TRAVEL LEISURE DL 01 on September 20, 2024 and sell it today you would earn a total of 50.00 from holding TRAVEL LEISURE DL 01 or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. TRAVEL LEISURE DL 01
Performance |
| Timeline |
| Norsk Hydro ASA |
| TRAVEL LEISURE DL |
Norsk Hydro and TRAVEL LEISURE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and TRAVEL LEISURE
The main advantage of trading using opposite Norsk Hydro and TRAVEL LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, TRAVEL LEISURE 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 TRAVEL LEISURE will offset losses from the drop in TRAVEL LEISURE's long position.| Norsk Hydro vs. NORWEGIAN AIR SHUT | Norsk Hydro vs. Seven West Media | Norsk Hydro vs. DELTA AIR LINES | Norsk Hydro vs. Westinghouse Air Brake |
| TRAVEL LEISURE vs. TripAdvisor | TRAVEL LEISURE vs. Superior Plus Corp | TRAVEL LEISURE vs. SIVERS SEMICONDUCTORS AB | TRAVEL LEISURE 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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