Correlation Between Northrop Grumman and O-I Glass

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Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and O-I Glass 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 Northrop Grumman and O-I Glass into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman Corp and O-I Glass, you can compare the effects of market volatilities on Northrop Grumman and O-I Glass 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 Northrop Grumman with a short position of O-I Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and O-I Glass.

Diversification Opportunities for Northrop Grumman and O-I Glass

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Northrop and O-I Glass is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman Corp and O-I Glass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on O-I Glass and Northrop Grumman 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 Northrop Grumman Corp are associated (or correlated) with O-I Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of O-I Glass has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and O-I Glass go up and down completely randomly.

Pair Corralation between Northrop Grumman and O-I Glass

Considering the 90-day investment horizon Northrop Grumman is expected to generate 1.15 times less return on investment than O-I Glass. But when comparing it to its historical volatility, Northrop Grumman Corp is 1.97 times less risky than O-I Glass. It trades about 0.06 of its potential returns per unit of risk. O-I Glass is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,088  in O-I Glass on May 21, 2022 and sell it today you would earn a total of  353.00  from holding O-I Glass or generate 32.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Northrop Grumman Corp  vs.  O-I Glass

 Performance (%) 
       Timeline  
Northrop Grumman Corp 
Northrop Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Northrop Grumman Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northrop Grumman may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Northrop Price Channel

O-I Glass 
O-I Glass Performance
0 of 100
Over the last 90 days O-I Glass has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, O-I Glass is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

O-I Glass Price Channel

Northrop Grumman and O-I Glass Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Northrop Grumman and O-I Glass

The main advantage of trading using opposite Northrop Grumman and O-I Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, O-I Glass 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 O-I Glass will offset losses from the drop in O-I Glass' long position.
The idea behind Northrop Grumman Corp and O-I Glass 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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