Correlation Between Norsk Hydro and ORIX JREIT

Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and ORIX JREIT 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 ORIX JREIT 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 ORIX JREIT INC, you can compare the effects of market volatilities on Norsk Hydro and ORIX JREIT 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 ORIX JREIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and ORIX JREIT.

Diversification Opportunities for Norsk Hydro and ORIX JREIT

0.21

Correlation Coefficient

Norsk Hydro  ORIX JREIT

Modest diversification

The 3 months correlation between Norsk and ORIX is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and ORIX JREIT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX JREIT INC 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 ORIX JREIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX JREIT INC has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and ORIX JREIT go up and down completely randomly.

Pair Corralation between Norsk Hydro and ORIX JREIT

Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.54 times less return on investment than ORIX JREIT. In addition to that, Norsk Hydro is 2.36 times more volatile than ORIX JREIT INC. It trades about 0.02 of its total potential returns per unit of risk. ORIX JREIT INC is currently generating about 0.06 per unit of volatility. If you would invest  94,500  in ORIX JREIT INC on September 19, 2024 and sell it today you would earn a total of  4,000  from holding ORIX JREIT INC or generate 4.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Norsk Hydro ASA  vs.  ORIX JREIT INC

Norsk Hydro ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norsk Hydro ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Norsk Hydro is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ORIX JREIT INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX JREIT INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ORIX JREIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Norsk Hydro and ORIX JREIT

The main advantage of trading using opposite Norsk Hydro and ORIX JREIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, ORIX JREIT 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 ORIX JREIT will offset losses from the drop in ORIX JREIT's long position.

The idea behind Norsk Hydro ASA and ORIX JREIT INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.