Correlation Between Norsk Hydro and Cars
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Cars 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 Cars 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 Cars Inc, you can compare the effects of market volatilities on Norsk Hydro and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Cars.
Diversification Opportunities for Norsk Hydro and Cars
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Norsk and Cars is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Cars go up and down completely randomly.
Pair Corralation between Norsk Hydro and Cars
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 2.0 times more return on investment than Cars. However, Norsk Hydro is 2.0 times more volatile than Cars Inc. It trades about 0.06 of its potential returns per unit of risk. Cars Inc is currently generating about 0.02 per unit of risk. If you would invest 349.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of 239.00 from holding Norsk Hydro ASA or generate 68.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Cars Inc
Performance |
| Timeline |
| Norsk Hydro ASA |
| Cars Inc |
Norsk Hydro and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Cars
The main advantage of trading using opposite Norsk Hydro and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB |
| Cars vs. Superior Plus Corp | Cars vs. SIVERS SEMICONDUCTORS AB | Cars vs. Norsk Hydro ASA | Cars 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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