Correlation Between Norsk Hydro and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies Limited, you can compare the effects of market volatilities on Norsk Hydro and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Loblaw Companies.
Diversification Opportunities for Norsk Hydro and Loblaw Companies
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norsk and Loblaw is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Loblaw Companies go up and down completely randomly.
Pair Corralation between Norsk Hydro and Loblaw Companies
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 3.59 times more return on investment than Loblaw Companies. However, Norsk Hydro is 3.59 times more volatile than Loblaw Companies Limited. It trades about 0.06 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about 0.14 per unit of risk. If you would invest 356.00 in Norsk Hydro ASA on September 20, 2024 and sell it today you would earn a total of 184.00 from holding Norsk Hydro ASA or generate 51.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Norsk Hydro ASA vs. Loblaw Companies Limited
Performance |
Timeline |
Norsk Hydro ASA |
Loblaw Companies |
Norsk Hydro and Loblaw Companies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norsk Hydro and Loblaw Companies
The main advantage of trading using opposite Norsk Hydro and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.Norsk Hydro vs. NORWEGIAN AIR SHUT | Norsk Hydro vs. Seven West Media | Norsk Hydro vs. DELTA AIR LINES | Norsk Hydro vs. Westinghouse Air Brake |
Loblaw Companies vs. Superior Plus Corp | Loblaw Companies vs. SIVERS SEMICONDUCTORS AB | Loblaw Companies vs. Norsk Hydro ASA | Loblaw Companies vs. Reliance Steel Aluminum |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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