Correlation Between Owens Corning and Northrop Grumman

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

Diversification Opportunities for Owens Corning and Northrop Grumman

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Owens and Northrop is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Owens Corning and Northrop Grumman Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman Corp and Owens Corning 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 Owens Corning are associated (or correlated) with Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman Corp has no effect on the direction of Owens Corning i.e., Owens Corning and Northrop Grumman go up and down completely randomly.

Pair Corralation between Owens Corning and Northrop Grumman

Allowing for the 90-day total investment horizon Owens Corning is expected to under-perform the Northrop Grumman. In addition to that, Owens Corning is 1.35 times more volatile than Northrop Grumman Corp. It trades about -0.01 of its total potential returns per unit of risk. Northrop Grumman Corp is currently generating about 0.07 per unit of volatility. If you would invest  36,264  in Northrop Grumman Corp on July 1, 2022 and sell it today you would earn a total of  11,075  from holding Northrop Grumman Corp or generate 30.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Owens Corning  vs.  Northrop Grumman Corp

 Performance (%) 
       Timeline  
Owens Corning 
Owens Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Owens Corning are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Owens Corning is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Owens Price Channel

Northrop Grumman Corp 
Northrop Performance
0 of 100
Over the last 90 days Northrop Grumman Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Northrop Grumman is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Northrop Price Channel

Owens Corning and Northrop Grumman Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Owens Corning and Northrop Grumman

The main advantage of trading using opposite Owens Corning and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Owens Corning position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.
Owens Corning vs. Amazon Inc
The idea behind Owens Corning and Northrop Grumman Corp 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.
Northrop Grumman vs. Amazon Inc
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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