Correlation Between Norsk Hydro and Zhongsheng Group
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Zhongsheng Group 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 Zhongsheng Group 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 Zhongsheng Group Holdings, you can compare the effects of market volatilities on Norsk Hydro and Zhongsheng Group 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 Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Zhongsheng Group.
Diversification Opportunities for Norsk Hydro and Zhongsheng Group
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Zhongsheng is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings 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 Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Zhongsheng Group go up and down completely randomly.
Pair Corralation between Norsk Hydro and Zhongsheng Group
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.87 times more return on investment than Zhongsheng Group. However, Norsk Hydro ASA is 1.15 times less risky than Zhongsheng Group. It trades about 0.05 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about -0.14 per unit of risk. If you would invest 553.00 in Norsk Hydro ASA on September 14, 2024 and sell it today you would earn a total of 13.00 from holding Norsk Hydro ASA or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Zhongsheng Group Holdings
Performance |
| Timeline |
| Norsk Hydro ASA |
| Zhongsheng Group Holdings |
Norsk Hydro and Zhongsheng Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Zhongsheng Group
The main advantage of trading using opposite Norsk Hydro and Zhongsheng Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Zhongsheng Group 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 Zhongsheng Group will offset losses from the drop in Zhongsheng Group's long position.| Norsk Hydro vs. Taylor Morrison Home | Norsk Hydro vs. American Homes 4 | Norsk Hydro vs. Haverty Furniture Companies | Norsk Hydro vs. Autohome ADR |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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