Correlation Between Kaiser Aluminum and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum 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 Kaiser Aluminum and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Norsk Hydro ASA, you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Norsk Hydro.
Diversification Opportunities for Kaiser Aluminum and Norsk Hydro
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaiser and Norsk is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Norsk Hydro go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Norsk Hydro
Assuming the 90 days trading horizon Kaiser Aluminum is expected to under-perform the Norsk Hydro. But the stock apears to be less risky and, when comparing its historical volatility, Kaiser Aluminum is 1.06 times less risky than Norsk Hydro. The stock trades about -0.02 of its potential returns per unit of risk. The Norsk Hydro ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 551.00 in Norsk Hydro ASA on November 7, 2024 and sell it today you would lose (1.00) from holding Norsk Hydro ASA or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. Norsk Hydro ASA
Performance |
| Timeline |
| Kaiser Aluminum |
| Norsk Hydro ASA |
Kaiser Aluminum and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and Norsk Hydro
The main advantage of trading using opposite Kaiser Aluminum and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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.| Kaiser Aluminum vs. Merit Medical Systems | Kaiser Aluminum vs. UPDATE SOFTWARE | Kaiser Aluminum vs. Genertec Universal Medical | Kaiser Aluminum vs. Take Two Interactive Software |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |