Correlation Between Norsk Hydro and Sparebank
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Sparebank 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 Sparebank 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 Sparebank 1 SR, you can compare the effects of market volatilities on Norsk Hydro and Sparebank 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 Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Sparebank.
Diversification Opportunities for Norsk Hydro and Sparebank
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Sparebank is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR 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 Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Sparebank go up and down completely randomly.
Pair Corralation between Norsk Hydro and Sparebank
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 2.06 times more return on investment than Sparebank. However, Norsk Hydro is 2.06 times more volatile than Sparebank 1 SR. It trades about 0.0 of its potential returns per unit of risk. Sparebank 1 SR is currently generating about -0.03 per unit of risk. If you would invest 6,866 in Norsk Hydro ASA on August 31, 2024 and sell it today you would lose (36.00) from holding Norsk Hydro ASA or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Sparebank 1 SR
Performance |
| Timeline |
| Norsk Hydro ASA |
| Sparebank 1 SR |
Norsk Hydro and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Sparebank
The main advantage of trading using opposite Norsk Hydro and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA |
| Sparebank vs. DnB ASA | Sparebank vs. Gjensidige Forsikring ASA | Sparebank vs. Orkla ASA | Sparebank vs. Telenor 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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