Correlation Between Insteel Industries and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Insteel Industries 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 Insteel Industries and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and Norsk Hydro ASA, you can compare the effects of market volatilities on Insteel Industries 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 Insteel Industries with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Norsk Hydro.
Diversification Opportunities for Insteel Industries and Norsk Hydro
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Insteel and Norsk is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries 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 Insteel Industries 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 Insteel Industries 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 Insteel Industries i.e., Insteel Industries and Norsk Hydro go up and down completely randomly.
Pair Corralation between Insteel Industries and Norsk Hydro
Assuming the 90 days horizon Insteel Industries is expected to generate 0.8 times more return on investment than Norsk Hydro. However, Insteel Industries is 1.24 times less risky than Norsk Hydro. It trades about 0.19 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.12 per unit of risk. If you would invest 2,480 in Insteel Industries on August 24, 2024 and sell it today you would earn a total of 280.00 from holding Insteel Industries or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. Norsk Hydro ASA
Performance |
| Timeline |
| Insteel Industries |
| Norsk Hydro ASA |
Insteel Industries and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and Norsk Hydro
The main advantage of trading using opposite Insteel Industries and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries 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.| Insteel Industries vs. Cleanaway Waste Management | Insteel Industries vs. Platinum Investment Management | Insteel Industries vs. Check Point Software | Insteel Industries vs. Constellation Software |
| Norsk Hydro vs. DAIRY FARM INTL | Norsk Hydro vs. Daito Trust Construction | Norsk Hydro vs. Aegean Airlines SA | Norsk Hydro vs. United Airlines Holdings |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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