Correlation Between TRAVEL + and Norsk Hydro

Can any of the company-specific risk be diversified away by investing in both TRAVEL + 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 TRAVEL + and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Norsk Hydro ASA, you can compare the effects of market volatilities on TRAVEL + 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 TRAVEL + with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Norsk Hydro.

Diversification Opportunities for TRAVEL + and Norsk Hydro

0.55

Correlation Coefficient

TRAVEL +  Norsk Hydro

Very weak diversification

The 3 months correlation between TRAVEL and Norsk is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 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 TRAVEL + 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 TRAVEL LEISURE DL 01 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 TRAVEL + i.e., TRAVEL + and Norsk Hydro go up and down completely randomly.

Pair Corralation between TRAVEL + and Norsk Hydro

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.79 times more return on investment than Norsk Hydro. However, TRAVEL LEISURE DL 01 is 1.27 times less risky than Norsk Hydro. It trades about 0.03 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.01 per unit of risk. If you would invest  5,199  in TRAVEL LEISURE DL 01 on December 4, 2024 and sell it today you would earn a total of  101.00  from holding TRAVEL LEISURE DL 01 or generate 1.94% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Norsk Hydro ASA

TRAVEL LEISURE DL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TRAVEL + is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Norsk Hydro ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norsk Hydro ASA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with TRAVEL + and Norsk Hydro

The main advantage of trading using opposite TRAVEL + and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + 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.

The idea behind TRAVEL LEISURE DL 01 and Norsk Hydro ASA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..