Correlation Between Aluminumof China and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Aluminumof China 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 Aluminumof China and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Norsk Hydro ASA, you can compare the effects of market volatilities on Aluminumof China 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 Aluminumof China with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Norsk Hydro.
Diversification Opportunities for Aluminumof China and Norsk Hydro
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aluminumof and Norsk is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of 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 Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and Norsk Hydro go up and down completely randomly.
Pair Corralation between Aluminumof China and Norsk Hydro
Assuming the 90 days horizon Aluminum of is expected to generate 1.32 times more return on investment than Norsk Hydro. However, Aluminumof China is 1.32 times more volatile than Norsk Hydro ASA. It trades about 0.06 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.01 per unit of risk. If you would invest 45.00 in Aluminum of on November 7, 2024 and sell it today you would earn a total of 16.00 from holding Aluminum of or generate 35.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Norsk Hydro ASA
Performance |
| Timeline |
| Aluminumof China |
| Norsk Hydro ASA |
Aluminumof China and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Norsk Hydro
The main advantage of trading using opposite Aluminumof China and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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.| Aluminumof China vs. UNITED RENTALS | Aluminumof China vs. OFFICE DEPOT | Aluminumof China vs. BORR DRILLING NEW | Aluminumof China vs. SCANSOURCE |
| Norsk Hydro vs. Norsk Hydro ASA | Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Alcoa Corp | Norsk Hydro vs. AMAG Austria Metall |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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