Correlation Between Norsk Hydro and Goodtech
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Goodtech 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 Goodtech 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 Goodtech, you can compare the effects of market volatilities on Norsk Hydro and Goodtech 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 Goodtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Goodtech.
Diversification Opportunities for Norsk Hydro and Goodtech
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and Goodtech is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Goodtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodtech 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 Goodtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodtech has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Goodtech go up and down completely randomly.
Pair Corralation between Norsk Hydro and Goodtech
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.52 times more return on investment than Goodtech. However, Norsk Hydro is 1.52 times more volatile than Goodtech. It trades about 0.12 of its potential returns per unit of risk. Goodtech is currently generating about -0.3 per unit of risk. If you would invest 6,844 in Norsk Hydro ASA on August 28, 2024 and sell it today you would earn a total of 408.00 from holding Norsk Hydro ASA or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Goodtech
Performance |
| Timeline |
| Norsk Hydro ASA |
| Goodtech |
Norsk Hydro and Goodtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Goodtech
The main advantage of trading using opposite Norsk Hydro and Goodtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Goodtech 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 Goodtech will offset losses from the drop in Goodtech's long position.| Norsk Hydro vs. Goodtech | Norsk Hydro vs. Havila Shipping ASA | Norsk Hydro vs. Eidesvik Offshore ASA | Norsk Hydro vs. Byggma |
| Goodtech vs. Eidesvik Offshore ASA | Goodtech vs. Kitron ASA | Goodtech vs. Havila Shipping ASA | Goodtech vs. Elkem 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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