Correlation Between Norsk Hydro and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Boston Beer 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 Boston Beer 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 The Boston Beer, you can compare the effects of market volatilities on Norsk Hydro and Boston Beer 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 Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Boston Beer.
Diversification Opportunities for Norsk Hydro and Boston Beer
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Boston is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Boston Beer go up and down completely randomly.
Pair Corralation between Norsk Hydro and Boston Beer
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the Boston Beer. In addition to that, Norsk Hydro is 1.69 times more volatile than The Boston Beer. It trades about -0.03 of its total potential returns per unit of risk. The Boston Beer is currently generating about 0.27 per unit of volatility. If you would invest 25,120 in The Boston Beer on September 13, 2024 and sell it today you would earn a total of 4,780 from holding The Boston Beer or generate 19.03% 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. The Boston Beer
Performance |
| Timeline |
| Norsk Hydro ASA |
| Boston Beer |
Norsk Hydro and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Boston Beer
The main advantage of trading using opposite Norsk Hydro and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer'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 |
| Boston Beer vs. Gol Intelligent Airlines | Boston Beer vs. Sunny Optical Technology | Boston Beer vs. DXC Technology Co | Boston Beer vs. United Airlines Holdings |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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