Correlation Between Big 5 and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Norsk Hydro ASA, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Norsk Hydro.
Diversification Opportunities for Big 5 and Norsk Hydro
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Big and Norsk is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting 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 Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Norsk Hydro go up and down completely randomly.
Pair Corralation between Big 5 and Norsk Hydro
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Norsk Hydro. In addition to that, Big 5 is 1.45 times more volatile than Norsk Hydro ASA. It trades about -0.1 of its total potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.12 per unit of volatility. If you would invest 560.00 in Norsk Hydro ASA on August 29, 2024 and sell it today you would earn a total of 45.00 from holding Norsk Hydro ASA or generate 8.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Norsk Hydro ASA
Performance |
| Timeline |
| Big 5 Sporting |
| Norsk Hydro ASA |
Big 5 and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Norsk Hydro
The main advantage of trading using opposite Big 5 and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.| Big 5 vs. FANDIFI TECHNOLOGY P | Big 5 vs. ScanSource | Big 5 vs. Vishay Intertechnology | Big 5 vs. PT Global Mediacom |
| Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. NMI Holdings | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB | Norsk Hydro vs. Talanx AG |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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