Correlation Between Norsk Hydro and Albemarle
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Albemarle 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 Albemarle 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 Albemarle, you can compare the effects of market volatilities on Norsk Hydro and Albemarle 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 Albemarle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Albemarle.
Diversification Opportunities for Norsk Hydro and Albemarle
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Albemarle is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Albemarle go up and down completely randomly.
Pair Corralation between Norsk Hydro and Albemarle
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Albemarle. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 2.32 times less risky than Albemarle. The stock trades about -0.24 of its potential returns per unit of risk. The Albemarle is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 9,488 in Albemarle on September 16, 2024 and sell it today you would earn a total of 12.00 from holding Albemarle or generate 0.13% 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. Albemarle
Performance |
| Timeline |
| Norsk Hydro ASA |
| Albemarle |
Norsk Hydro and Albemarle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Albemarle
The main advantage of trading using opposite Norsk Hydro and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Albemarle 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 Albemarle will offset losses from the drop in Albemarle's long position.| Norsk Hydro vs. AIR PRODCHEMICALS | Norsk Hydro vs. Spirent Communications plc | Norsk Hydro vs. X FAB Silicon Foundries | Norsk Hydro vs. Quaker Chemical |
| Albemarle vs. United Breweries Co | Albemarle vs. Charter Communications | Albemarle vs. MAROC TELECOM | Albemarle vs. Ribbon Communications |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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