Correlation Between Norsk Hydro and China Energy
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and China Energy 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 China Energy 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 China Energy Engineering, you can compare the effects of market volatilities on Norsk Hydro and China Energy 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 China Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and China Energy.
Diversification Opportunities for Norsk Hydro and China Energy
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and China is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and China Energy Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Energy Engineering 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 China Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Energy Engineering has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and China Energy go up and down completely randomly.
Pair Corralation between Norsk Hydro and China Energy
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.71 times less return on investment than China Energy. But when comparing it to its historical volatility, Norsk Hydro ASA is 1.93 times less risky than China Energy. It trades about 0.08 of its potential returns per unit of risk. China Energy Engineering is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8.11 in China Energy Engineering on November 3, 2024 and sell it today you would earn a total of 2.89 from holding China Energy Engineering or generate 35.64% 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. China Energy Engineering
Performance |
| Timeline |
| Norsk Hydro ASA |
| China Energy Engineering |
Norsk Hydro and China Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and China Energy
The main advantage of trading using opposite Norsk Hydro and China Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, China Energy 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 China Energy will offset losses from the drop in China Energy's long position.| Norsk Hydro vs. Salesforce | Norsk Hydro vs. Lendlease Group | Norsk Hydro vs. FUYO GENERAL LEASE | Norsk Hydro vs. Sixt Leasing SE |
| China Energy vs. Geely Automobile Holdings | China Energy vs. INTER CARS SA | China Energy vs. United Utilities Group | China Energy vs. ASURE SOFTWARE |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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