Correlation Between Norsk Hydro and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Ebro Foods 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 Ebro Foods 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 Ebro Foods SA, you can compare the effects of market volatilities on Norsk Hydro and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Ebro Foods.
Diversification Opportunities for Norsk Hydro and Ebro Foods
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norsk and Ebro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Ebro Foods go up and down completely randomly.
Pair Corralation between Norsk Hydro and Ebro Foods
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Ebro Foods. In addition to that, Norsk Hydro is 2.36 times more volatile than Ebro Foods SA. It trades about -0.57 of its total potential returns per unit of risk. Ebro Foods SA is currently generating about -0.05 per unit of volatility. If you would invest 1,588 in Ebro Foods SA on September 28, 2024 and sell it today you would lose (8.00) from holding Ebro Foods SA or give up 0.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Norsk Hydro ASA vs. Ebro Foods SA
Performance |
Timeline |
Norsk Hydro ASA |
Ebro Foods SA |
Norsk Hydro and Ebro Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norsk Hydro and Ebro Foods
The main advantage of trading using opposite Norsk Hydro and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.Norsk Hydro vs. Norsk Hydro ASA | ||
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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