Correlation Between Norsk Hydro and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Iridium Communications 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 Iridium Communications 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 Iridium Communications, you can compare the effects of market volatilities on Norsk Hydro and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Iridium Communications.
Diversification Opportunities for Norsk Hydro and Iridium Communications
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Iridium is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Iridium Communications go up and down completely randomly.
Pair Corralation between Norsk Hydro and Iridium Communications
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.19 times less return on investment than Iridium Communications. In addition to that, Norsk Hydro is 1.16 times more volatile than Iridium Communications. It trades about 0.07 of its total potential returns per unit of risk. Iridium Communications is currently generating about 0.1 per unit of volatility. If you would invest 2,843 in Iridium Communications on September 13, 2024 and sell it today you would earn a total of 131.00 from holding Iridium Communications or generate 4.61% 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. Iridium Communications
Performance |
| Timeline |
| Norsk Hydro ASA |
| Iridium Communications |
Norsk Hydro and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Iridium Communications
The main advantage of trading using opposite Norsk Hydro and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Norsk Hydro vs. Goosehead Insurance | Norsk Hydro vs. RETAIL FOOD GROUP | Norsk Hydro vs. COSTCO WHOLESALE CDR | Norsk Hydro vs. SBI Insurance Group |
| Iridium Communications vs. Superior Plus Corp | Iridium Communications vs. SIVERS SEMICONDUCTORS AB | Iridium Communications vs. Norsk Hydro ASA | Iridium Communications vs. Reliance Steel Aluminum |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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