Correlation Between Norsk Hydro and Telenor ASA
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Telenor 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 Telenor 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 Telenor ASA, you can compare the effects of market volatilities on Norsk Hydro and Telenor 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 Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Telenor ASA.
Diversification Opportunities for Norsk Hydro and Telenor ASA
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norsk and Telenor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Telenor ASA go up and down completely randomly.
Pair Corralation between Norsk Hydro and Telenor ASA
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 6.35 times less return on investment than Telenor ASA. In addition to that, Norsk Hydro is 1.85 times more volatile than Telenor ASA. It trades about 0.01 of its total potential returns per unit of risk. Telenor ASA is currently generating about 0.07 per unit of volatility. If you would invest 9,774 in Telenor ASA on November 2, 2024 and sell it today you would earn a total of 4,106 from holding Telenor ASA or generate 42.01% 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. Telenor ASA
Performance |
| Timeline |
| Norsk Hydro ASA |
| Telenor ASA |
Norsk Hydro and Telenor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Telenor ASA
The main advantage of trading using opposite Norsk Hydro and Telenor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Telenor 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 Telenor ASA will offset losses from the drop in Telenor 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 |
| Telenor ASA vs. Orkla ASA | Telenor ASA vs. DnB ASA | Telenor ASA vs. Yara International ASA | Telenor ASA vs. Storebrand 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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