Correlation Between Norsk Hydro and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Entravision 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 Entravision 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 Entravision Communications, you can compare the effects of market volatilities on Norsk Hydro and Entravision 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 Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Entravision Communications.
Diversification Opportunities for Norsk Hydro and Entravision Communications
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Entravision is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Entravision Communications go up and down completely randomly.
Pair Corralation between Norsk Hydro and Entravision Communications
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.93 times more return on investment than Entravision Communications. However, Norsk Hydro ASA is 1.08 times less risky than Entravision Communications. It trades about 0.06 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.01 per unit of risk. If you would invest 326.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of 262.00 from holding Norsk Hydro ASA or generate 80.37% 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. Entravision Communications
Performance |
| Timeline |
| Norsk Hydro ASA |
| Entravision Communications |
Norsk Hydro and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Entravision Communications
The main advantage of trading using opposite Norsk Hydro and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Entravision 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 Entravision Communications will offset losses from the drop in Entravision Communications' long position.| Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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