Correlation Between Yara International and Hermana Holding
Can any of the company-specific risk be diversified away by investing in both Yara International and Hermana Holding 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 Yara International and Hermana Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yara International ASA and Hermana Holding ASA, you can compare the effects of market volatilities on Yara International and Hermana Holding 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 Yara International with a short position of Hermana Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yara International and Hermana Holding.
Diversification Opportunities for Yara International and Hermana Holding
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Yara and Hermana is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Hermana Holding ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermana Holding ASA and Yara International 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 Yara International ASA are associated (or correlated) with Hermana Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hermana Holding ASA has no effect on the direction of Yara International i.e., Yara International and Hermana Holding go up and down completely randomly.
Pair Corralation between Yara International and Hermana Holding
Assuming the 90 days trading horizon Yara International ASA is expected to generate 0.51 times more return on investment than Hermana Holding. However, Yara International ASA is 1.95 times less risky than Hermana Holding. It trades about 0.5 of its potential returns per unit of risk. Hermana Holding ASA is currently generating about 0.14 per unit of risk. If you would invest 30,150 in Yara International ASA on October 20, 2024 and sell it today you would earn a total of 3,050 from holding Yara International ASA or generate 10.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yara International ASA vs. Hermana Holding ASA
Performance |
| Timeline |
| Yara International ASA |
| Hermana Holding ASA |
Yara International and Hermana Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yara International and Hermana Holding
The main advantage of trading using opposite Yara International and Hermana Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International position performs unexpectedly, Hermana Holding 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 Hermana Holding will offset losses from the drop in Hermana Holding's long position.| Yara International vs. Telenor ASA | Yara International vs. Orkla ASA | Yara International vs. DnB ASA | Yara International vs. Storebrand ASA |
| Hermana Holding vs. Equinor ASA | Hermana Holding vs. DnB ASA | Hermana Holding vs. Aker BP ASA | Hermana Holding vs. Telenor 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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