Correlation Between Albemarle and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Albemarle 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 Albemarle and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albemarle and Norsk Hydro ASA, you can compare the effects of market volatilities on Albemarle 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 Albemarle with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and Norsk Hydro.
Diversification Opportunities for Albemarle and Norsk Hydro
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Albemarle and Norsk is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle 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 Albemarle 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 Albemarle 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 Albemarle i.e., Albemarle and Norsk Hydro go up and down completely randomly.
Pair Corralation between Albemarle and Norsk Hydro
Assuming the 90 days horizon Albemarle is expected to generate 2.32 times more return on investment than Norsk Hydro. However, Albemarle is 2.32 times more volatile than Norsk Hydro ASA. It trades about 0.02 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.24 per unit of risk. If you would invest 9,488 in Albemarle on September 16, 2024 and sell it today you would earn a total of 12.00 from holding Albemarle or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Albemarle vs. Norsk Hydro ASA
Performance |
| Timeline |
| Albemarle |
| Norsk Hydro ASA |
Albemarle and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Albemarle and Norsk Hydro
The main advantage of trading using opposite Albemarle and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle 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.| Albemarle vs. United Breweries Co | Albemarle vs. Charter Communications | Albemarle vs. MAROC TELECOM | Albemarle vs. Ribbon Communications |
| Norsk Hydro vs. AIR PRODCHEMICALS | Norsk Hydro vs. Spirent Communications plc | Norsk Hydro vs. X FAB Silicon Foundries | Norsk Hydro vs. Quaker Chemical |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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