Correlation Between Norsk Hydro and WILLIS LEASE
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and WILLIS LEASE 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 WILLIS LEASE 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 WILLIS LEASE FIN, you can compare the effects of market volatilities on Norsk Hydro and WILLIS LEASE 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 WILLIS LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and WILLIS LEASE.
Diversification Opportunities for Norsk Hydro and WILLIS LEASE
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and WILLIS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and WILLIS LEASE go up and down completely randomly.
Pair Corralation between Norsk Hydro and WILLIS LEASE
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 2.5 times less return on investment than WILLIS LEASE. In addition to that, Norsk Hydro is 1.24 times more volatile than WILLIS LEASE FIN. It trades about 0.03 of its total potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.1 per unit of volatility. If you would invest 5,192 in WILLIS LEASE FIN on September 14, 2024 and sell it today you would earn a total of 14,008 from holding WILLIS LEASE FIN or generate 269.8% 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. WILLIS LEASE FIN
Performance |
| Timeline |
| Norsk Hydro ASA |
| WILLIS LEASE FIN |
Norsk Hydro and WILLIS LEASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and WILLIS LEASE
The main advantage of trading using opposite Norsk Hydro and WILLIS LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, WILLIS LEASE 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 WILLIS LEASE will offset losses from the drop in WILLIS LEASE's long position.| Norsk Hydro vs. Taylor Morrison Home | Norsk Hydro vs. American Homes 4 | Norsk Hydro vs. Haverty Furniture Companies | Norsk Hydro vs. Autohome ADR |
| WILLIS LEASE vs. United Rentals | WILLIS LEASE vs. Superior Plus Corp | WILLIS LEASE vs. SIVERS SEMICONDUCTORS AB | WILLIS LEASE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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