Correlation Between Norsk Hydro and Clearwater Paper
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Clearwater Paper 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 Clearwater Paper 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 Clearwater Paper, you can compare the effects of market volatilities on Norsk Hydro and Clearwater Paper 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 Clearwater Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Clearwater Paper.
Diversification Opportunities for Norsk Hydro and Clearwater Paper
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Norsk and Clearwater is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Clearwater Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper 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 Clearwater Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Paper has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Clearwater Paper go up and down completely randomly.
Pair Corralation between Norsk Hydro and Clearwater Paper
Assuming the 90 days horizon Norsk Hydro ASA is expected to generate 1.2 times more return on investment than Clearwater Paper. However, Norsk Hydro is 1.2 times more volatile than Clearwater Paper. It trades about 0.13 of its potential returns per unit of risk. Clearwater Paper is currently generating about 0.05 per unit of risk. If you would invest 600.00 in Norsk Hydro ASA on August 27, 2024 and sell it today you would earn a total of 62.00 from holding Norsk Hydro ASA or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Clearwater Paper
Performance |
| Timeline |
| Norsk Hydro ASA |
| Clearwater Paper |
Norsk Hydro and Clearwater Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Clearwater Paper
The main advantage of trading using opposite Norsk Hydro and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Clearwater Paper 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 Clearwater Paper will offset losses from the drop in Clearwater Paper's long position.The idea behind Norsk Hydro ASA and Clearwater Paper pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Clearwater Paper vs. Sylvamo Corp | Clearwater Paper vs. Suzano Papel e | Clearwater Paper vs. Klabin Sa A | Clearwater Paper vs. Mercer International |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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