Correlation Between Norsk Hydro and Lea Bank
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Lea Bank 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 Lea Bank 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 Lea Bank ASA, you can compare the effects of market volatilities on Norsk Hydro and Lea Bank 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 Lea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Lea Bank.
Diversification Opportunities for Norsk Hydro and Lea Bank
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Lea is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Lea Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lea Bank 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 Lea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lea Bank ASA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Lea Bank go up and down completely randomly.
Pair Corralation between Norsk Hydro and Lea Bank
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.2 times more return on investment than Lea Bank. However, Norsk Hydro is 1.2 times more volatile than Lea Bank ASA. It trades about 0.12 of its potential returns per unit of risk. Lea Bank ASA is currently generating about 0.11 per unit of risk. If you would invest 6,844 in Norsk Hydro ASA on August 27, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Lea Bank ASA
Performance |
| Timeline |
| Norsk Hydro ASA |
| Lea Bank ASA |
Norsk Hydro and Lea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Lea Bank
The main advantage of trading using opposite Norsk Hydro and Lea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Lea Bank 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 Lea Bank will offset losses from the drop in Lea Bank's long position.| Norsk Hydro vs. Goodtech | Norsk Hydro vs. Havila Shipping ASA | Norsk Hydro vs. Eidesvik Offshore ASA | Norsk Hydro vs. Byggma |
| Lea Bank vs. Elkem ASA | Lea Bank vs. Vow ASA | Lea Bank vs. North Energy ASA | Lea Bank vs. Arcticzymes Technologies 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 Stocks Directory module to find actively traded stocks across global markets.
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