Correlation Between Alcoa Corp and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Norsk Hydro ASA, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Norsk Hydro.
Diversification Opportunities for Alcoa Corp and Norsk Hydro
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alcoa and Norsk is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Norsk Hydro go up and down completely randomly.
Pair Corralation between Alcoa Corp and Norsk Hydro
Assuming the 90 days horizon Alcoa Corp is expected to generate 2.57 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, Alcoa Corp is 1.12 times less risky than Norsk Hydro. It trades about 0.02 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 412.00 in Norsk Hydro ASA on August 28, 2024 and sell it today you would earn a total of 210.00 from holding Norsk Hydro ASA or generate 50.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Norsk Hydro ASA
Performance |
| Timeline |
| Alcoa Corp |
| Norsk Hydro ASA |
Alcoa Corp and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Norsk Hydro
The main advantage of trading using opposite Alcoa Corp and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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.| Alcoa Corp vs. AIR PRODCHEMICALS | Alcoa Corp vs. Siamgas And Petrochemicals | Alcoa Corp vs. Regions Financial | Alcoa Corp vs. NISSAN CHEMICAL IND |
| Norsk Hydro vs. MAGIC SOFTWARE ENTR | Norsk Hydro vs. COMINTL BANK ADR1 | Norsk Hydro vs. National Bank Holdings | Norsk Hydro vs. Commonwealth Bank of |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |