Correlation Between Alumina and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Alumina 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 Alumina and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alumina Limited and Norsk Hydro ASA, you can compare the effects of market volatilities on Alumina 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 Alumina with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumina and Norsk Hydro.
Diversification Opportunities for Alumina and Norsk Hydro
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alumina and Norsk is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited 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 Alumina 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 Alumina Limited 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 Alumina i.e., Alumina and Norsk Hydro go up and down completely randomly.
Pair Corralation between Alumina and Norsk Hydro
If you would invest 801.00 in Norsk Hydro ASA on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Norsk Hydro ASA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alumina Limited vs. Norsk Hydro ASA
Performance |
| Timeline |
| Alumina Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Norsk Hydro ASA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Alumina and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alumina and Norsk Hydro
The main advantage of trading using opposite Alumina and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumina 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.| Alumina vs. Kinetik Holdings | Alumina vs. Atmos Energy | Alumina vs. Kenon Holdings | Alumina vs. Alliant Energy Corp |
| Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Century Aluminum | Norsk Hydro vs. China Hongqiao Group | Norsk Hydro vs. Alcoa Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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