Correlation Between Norsk Hydro and Var Energi
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Var Energi 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 Var Energi 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 Var Energi ASA, you can compare the effects of market volatilities on Norsk Hydro and Var Energi 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 Var Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Var Energi.
Diversification Opportunities for Norsk Hydro and Var Energi
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norsk and Var is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Var Energi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Var Energi 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 Var Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Var Energi ASA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Var Energi go up and down completely randomly.
Pair Corralation between Norsk Hydro and Var Energi
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 8.09 times less return on investment than Var Energi. In addition to that, Norsk Hydro is 1.06 times more volatile than Var Energi ASA. It trades about 0.01 of its total potential returns per unit of risk. Var Energi ASA is currently generating about 0.05 per unit of volatility. If you would invest 2,314 in Var Energi ASA on November 2, 2024 and sell it today you would earn a total of 1,128 from holding Var Energi ASA or generate 48.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Var Energi ASA
Performance |
| Timeline |
| Norsk Hydro ASA |
| Var Energi ASA |
Norsk Hydro and Var Energi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Var Energi
The main advantage of trading using opposite Norsk Hydro and Var Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Var Energi 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 Var Energi will offset losses from the drop in Var Energi's long position.| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA |
| Var Energi vs. Aker BP ASA | Var Energi vs. Belships | Var Energi vs. MPC Container Ships | Var Energi vs. BW Energy |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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