Correlation Between Resmed and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Resmed and Norsk Hydro 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 Resmed and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resmed Inc DRC and Norsk Hydro ASA, you can compare the effects of market volatilities on Resmed and Norsk Hydro 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 Resmed with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resmed and Norsk Hydro.
Diversification Opportunities for Resmed and Norsk Hydro
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Resmed and Norsk is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Resmed Inc DRC and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA and Resmed 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 Resmed Inc DRC are associated (or correlated) with Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Resmed i.e., Resmed and Norsk Hydro go up and down completely randomly.
Pair Corralation between Resmed and Norsk Hydro
Assuming the 90 days trading horizon Resmed is expected to generate 2.48 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, Resmed Inc DRC is 1.64 times less risky than Norsk Hydro. It trades about 0.02 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 447.00 in Norsk Hydro ASA on October 13, 2024 and sell it today you would earn a total of 105.00 from holding Norsk Hydro ASA or generate 23.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Resmed Inc DRC vs. Norsk Hydro ASA
Performance |
| Timeline |
| Resmed Inc DRC |
| Norsk Hydro ASA |
Resmed and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resmed and Norsk Hydro
The main advantage of trading using opposite Resmed and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resmed position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Resmed vs. Sartorius Stedim Biotech | Resmed vs. Superior Plus Corp | Resmed vs. NMI Holdings | Resmed vs. SIVERS SEMICONDUCTORS AB |
| Norsk Hydro vs. Peijia Medical Limited | Norsk Hydro vs. China Eastern Airlines | Norsk Hydro vs. IMAGIN MEDICAL INC | Norsk Hydro vs. SOUTHWEST AIRLINES |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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