Correlation Between Aega ASA and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Aega ASA 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 Aega ASA and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aega ASA and Norsk Hydro ASA, you can compare the effects of market volatilities on Aega ASA 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 Aega ASA with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aega ASA and Norsk Hydro.
Diversification Opportunities for Aega ASA and Norsk Hydro
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aega and Norsk is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aega ASA 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 Aega ASA 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 Aega ASA 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 Aega ASA i.e., Aega ASA and Norsk Hydro go up and down completely randomly.
Pair Corralation between Aega ASA and Norsk Hydro
Assuming the 90 days trading horizon Aega ASA is expected to generate 8.55 times more return on investment than Norsk Hydro. However, Aega ASA is 8.55 times more volatile than Norsk Hydro ASA. It trades about 0.09 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.05 per unit of risk. If you would invest 45.00 in Aega ASA on September 12, 2024 and sell it today you would earn a total of 3.00 from holding Aega ASA or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aega ASA vs. Norsk Hydro ASA
Performance |
| Timeline |
| Aega ASA |
| Norsk Hydro ASA |
Aega ASA and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aega ASA and Norsk Hydro
The main advantage of trading using opposite Aega ASA and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aega ASA 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.| Aega ASA vs. EAM Solar ASA | Aega ASA vs. Elkem ASA | Aega ASA vs. DNB NOR KAPFORV | Aega ASA vs. Integrated Wind Solutions |
| Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA | Norsk Hydro vs. DnB ASA |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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