Correlation Between Norsk Hydro and PCI Biotech
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and PCI Biotech 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 PCI Biotech 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 PCI Biotech Holding, you can compare the effects of market volatilities on Norsk Hydro and PCI Biotech 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 PCI Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and PCI Biotech.
Diversification Opportunities for Norsk Hydro and PCI Biotech
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norsk and PCI is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and PCI Biotech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI Biotech Holding 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 PCI Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI Biotech Holding has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and PCI Biotech go up and down completely randomly.
Pair Corralation between Norsk Hydro and PCI Biotech
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the PCI Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 5.12 times less risky than PCI Biotech. The stock trades about -0.06 of its potential returns per unit of risk. The PCI Biotech Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 122.00 in PCI Biotech Holding on December 1, 2024 and sell it today you would earn a total of 18.00 from holding PCI Biotech Holding or generate 14.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. PCI Biotech Holding
Performance |
| Timeline |
| Norsk Hydro ASA |
| PCI Biotech Holding |
Norsk Hydro and PCI Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and PCI Biotech
The main advantage of trading using opposite Norsk Hydro and PCI Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, PCI Biotech 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 PCI Biotech will offset losses from the drop in PCI Biotech's long position.| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA |
| PCI Biotech vs. Proximar Seafood AS | PCI Biotech vs. Skue Sparebank | PCI Biotech vs. Awilco Drilling PLC | PCI Biotech vs. Nordic Semiconductor 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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