Correlation Between Bouvet and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Bouvet 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 Bouvet and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bouvet and Norsk Hydro ASA, you can compare the effects of market volatilities on Bouvet 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 Bouvet with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouvet and Norsk Hydro.
Diversification Opportunities for Bouvet and Norsk Hydro
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bouvet and Norsk is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bouvet 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 Bouvet 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 Bouvet 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 Bouvet i.e., Bouvet and Norsk Hydro go up and down completely randomly.
Pair Corralation between Bouvet and Norsk Hydro
Assuming the 90 days trading horizon Bouvet is expected to generate 1.5 times less return on investment than Norsk Hydro. In addition to that, Bouvet is 1.09 times more volatile than Norsk Hydro ASA. It trades about 0.27 of its total potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.45 per unit of volatility. If you would invest 6,234 in Norsk Hydro ASA on October 20, 2024 and sell it today you would earn a total of 636.00 from holding Norsk Hydro ASA or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Bouvet vs. Norsk Hydro ASA
Performance |
| Timeline |
| Bouvet |
| Norsk Hydro ASA |
Bouvet and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouvet and Norsk Hydro
The main advantage of trading using opposite Bouvet and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouvet 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.| Bouvet vs. Huddlestock Fintech As | Bouvet vs. Xplora Technologies As | Bouvet vs. Polight ASA | Bouvet vs. Elkem ASA |
| Norsk Hydro vs. Storebrand ASA | Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Lery Seafood Group | 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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