Correlation Between Norsk Hydro and CGN Power
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and CGN Power 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 CGN Power 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 CGN Power Co, you can compare the effects of market volatilities on Norsk Hydro and CGN Power 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 CGN Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and CGN Power.
Diversification Opportunities for Norsk Hydro and CGN Power
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norsk and CGN is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and CGN Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Power 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 CGN Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Power has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and CGN Power go up and down completely randomly.
Pair Corralation between Norsk Hydro and CGN Power
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 8.61 times less return on investment than CGN Power. But when comparing it to its historical volatility, Norsk Hydro ASA is 3.32 times less risky than CGN Power. It trades about 0.03 of its potential returns per unit of risk. CGN Power Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 7.14 in CGN Power Co on October 1, 2024 and sell it today you would earn a total of 20.86 from holding CGN Power Co or generate 292.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Norsk Hydro ASA vs. CGN Power Co
Performance |
| Timeline |
| Norsk Hydro ASA |
| CGN Power |
Norsk Hydro and CGN Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and CGN Power
The main advantage of trading using opposite Norsk Hydro and CGN Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, CGN Power 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 CGN Power will offset losses from the drop in CGN Power's long position.| Norsk Hydro vs. Summit Materials | Norsk Hydro vs. Compagnie Plastic Omnium | Norsk Hydro vs. TOREX SEMICONDUCTOR LTD | Norsk Hydro vs. EAGLE MATERIALS |
| CGN Power vs. Cal Maine Foods | CGN Power vs. TreeHouse Foods | CGN Power vs. National Beverage Corp | CGN Power vs. BORR DRILLING NEW |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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