Correlation Between Norsk Hydro and Aker BP
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Aker BP 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 Norsk Hydro and Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norsk Hydro ASA and Aker BP ASA, you can compare the effects of market volatilities on Norsk Hydro and Aker BP 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 Norsk Hydro with a short position of Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Aker BP.
Diversification Opportunities for Norsk Hydro and Aker BP
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Norsk and Aker is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA and Norsk Hydro 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 Norsk Hydro ASA are associated (or correlated) with Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Aker BP go up and down completely randomly.
Pair Corralation between Norsk Hydro and Aker BP
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.16 times more return on investment than Aker BP. However, Norsk Hydro is 1.16 times more volatile than Aker BP ASA. It trades about 0.01 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.0 per unit of risk. If you would invest 7,020 in Norsk Hydro ASA on November 2, 2024 and sell it today you would lose (244.00) from holding Norsk Hydro ASA or give up 3.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Aker BP ASA
Performance |
| Timeline |
| Norsk Hydro ASA |
| Aker BP ASA |
Norsk Hydro and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Aker BP
The main advantage of trading using opposite Norsk Hydro and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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