Correlation Between Norsk Hydro and Nekkar Asa
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Nekkar Asa 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 Nekkar Asa 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 Nekkar Asa, you can compare the effects of market volatilities on Norsk Hydro and Nekkar Asa 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 Nekkar Asa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Nekkar Asa.
Diversification Opportunities for Norsk Hydro and Nekkar Asa
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and Nekkar is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Nekkar Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nekkar 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 Nekkar Asa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nekkar Asa has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Nekkar Asa go up and down completely randomly.
Pair Corralation between Norsk Hydro and Nekkar Asa
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.01 times more return on investment than Nekkar Asa. However, Norsk Hydro is 1.01 times more volatile than Nekkar Asa. It trades about 0.03 of its potential returns per unit of risk. Nekkar Asa is currently generating about -0.03 per unit of risk. If you would invest 6,770 in Norsk Hydro ASA on September 1, 2024 and sell it today you would earn a total of 60.00 from holding Norsk Hydro ASA or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Nekkar Asa
Performance |
| Timeline |
| Norsk Hydro ASA |
| Nekkar Asa |
Norsk Hydro and Nekkar Asa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Nekkar Asa
The main advantage of trading using opposite Norsk Hydro and Nekkar Asa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Nekkar Asa 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 Nekkar Asa will offset losses from the drop in Nekkar Asa's long position.| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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