Correlation Between Northland Power and Orsted A/S
Can any of the company-specific risk be diversified away by investing in both Northland Power and Orsted A/S 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 Northland Power and Orsted A/S into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northland Power and Orsted AS, you can compare the effects of market volatilities on Northland Power and Orsted A/S 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 Northland Power with a short position of Orsted A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and Orsted A/S.
Diversification Opportunities for Northland Power and Orsted A/S
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northland and Orsted is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted A/S and Northland Power 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 Northland Power are associated (or correlated) with Orsted A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted A/S has no effect on the direction of Northland Power i.e., Northland Power and Orsted A/S go up and down completely randomly.
Pair Corralation between Northland Power and Orsted A/S
Assuming the 90 days horizon Northland Power is expected to generate 0.53 times more return on investment than Orsted A/S. However, Northland Power is 1.89 times less risky than Orsted A/S. It trades about -0.17 of its potential returns per unit of risk. Orsted AS is currently generating about -0.21 per unit of risk. If you would invest 1,555 in Northland Power on October 26, 2024 and sell it today you would lose (306.00) from holding Northland Power or give up 19.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northland Power vs. Orsted AS
Performance |
| Timeline |
| Northland Power |
| Orsted A/S |
Northland Power and Orsted A/S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northland Power and Orsted A/S
The main advantage of trading using opposite Northland Power and Orsted A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, Orsted A/S 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 Orsted A/S will offset losses from the drop in Orsted A/S's long position.| Northland Power vs. Tidewater Renewables | Northland Power vs. Renew Energy Global | Northland Power vs. Clearway Energy | Northland Power vs. Brookfield Renewable Partners |
| Orsted A/S vs. Innergex Renewable Energy | Orsted A/S vs. Clearway Energy | Orsted A/S vs. Fusion Fuel Green | Orsted A/S vs. Powertap Hydrogen Capital |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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