Correlation Between Norsk Hydro and Align Technology
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Align Technology 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 Align Technology 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 Align Technology, you can compare the effects of market volatilities on Norsk Hydro and Align Technology 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 Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Align Technology.
Diversification Opportunities for Norsk Hydro and Align Technology
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norsk and Align is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Align Technology go up and down completely randomly.
Pair Corralation between Norsk Hydro and Align Technology
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.95 times less return on investment than Align Technology. In addition to that, Norsk Hydro is 1.56 times more volatile than Align Technology. It trades about 0.07 of its total potential returns per unit of risk. Align Technology is currently generating about 0.22 per unit of volatility. If you would invest 20,680 in Align Technology on September 13, 2024 and sell it today you would earn a total of 1,720 from holding Align Technology or generate 8.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Align Technology
Performance |
| Timeline |
| Norsk Hydro ASA |
| Align Technology |
Norsk Hydro and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Align Technology
The main advantage of trading using opposite Norsk Hydro and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's 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 |
| Align Technology vs. Superior Plus Corp | Align Technology vs. SIVERS SEMICONDUCTORS AB | Align Technology vs. Norsk Hydro ASA | Align Technology 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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