Correlation Between Norsk Hydro and China Communications
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and China Communications 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 China Communications 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 China Communications Services, you can compare the effects of market volatilities on Norsk Hydro and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and China Communications.
Diversification Opportunities for Norsk Hydro and China Communications
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and China Communications go up and down completely randomly.
Pair Corralation between Norsk Hydro and China Communications
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.96 times less return on investment than China Communications. In addition to that, Norsk Hydro is 1.96 times more volatile than China Communications Services. It trades about 0.07 of its total potential returns per unit of risk. China Communications Services is currently generating about 0.28 per unit of volatility. If you would invest 47.00 in China Communications Services on September 13, 2024 and sell it today you would earn a total of 4.00 from holding China Communications Services or generate 8.51% 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. China Communications Services
Performance |
| Timeline |
| Norsk Hydro ASA |
| China Communications |
Norsk Hydro and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and China Communications
The main advantage of trading using opposite Norsk Hydro and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' 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 |
| China Communications vs. Superior Plus Corp | China Communications vs. SIVERS SEMICONDUCTORS AB | China Communications vs. Norsk Hydro ASA | China Communications 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |