Correlation Between TESCO PLC and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both TESCO PLC 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 TESCO PLC and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TESCO PLC LS 0633333 and Norsk Hydro ASA, you can compare the effects of market volatilities on TESCO PLC 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 TESCO PLC with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of TESCO PLC and Norsk Hydro.
Diversification Opportunities for TESCO PLC and Norsk Hydro
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TESCO and Norsk is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TESCO PLC LS 0633333 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 TESCO PLC 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 TESCO PLC LS 0633333 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 TESCO PLC i.e., TESCO PLC and Norsk Hydro go up and down completely randomly.
Pair Corralation between TESCO PLC and Norsk Hydro
Assuming the 90 days trading horizon TESCO PLC LS 0633333 is expected to generate 0.47 times more return on investment than Norsk Hydro. However, TESCO PLC LS 0633333 is 2.14 times less risky than Norsk Hydro. It trades about 0.17 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.07 per unit of risk. If you would invest 414.00 in TESCO PLC LS 0633333 on September 1, 2024 and sell it today you would earn a total of 24.00 from holding TESCO PLC LS 0633333 or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TESCO PLC LS 0633333 vs. Norsk Hydro ASA
Performance |
| Timeline |
| TESCO PLC LS |
| Norsk Hydro ASA |
TESCO PLC and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TESCO PLC and Norsk Hydro
The main advantage of trading using opposite TESCO PLC and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TESCO PLC 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.| TESCO PLC vs. National Storage Affiliates | TESCO PLC vs. CANON MARKETING JP | TESCO PLC vs. Datang International Power | TESCO PLC vs. Tradeweb Markets |
| Norsk Hydro vs. Austevoll Seafood ASA | Norsk Hydro vs. Performance Food Group | Norsk Hydro vs. Collins Foods Limited | Norsk Hydro vs. Vulcan Materials |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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