Correlation Between Norsk Hydro and Evonik Industries
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Evonik Industries 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 Evonik Industries 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 Evonik Industries AG, you can compare the effects of market volatilities on Norsk Hydro and Evonik Industries 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 Evonik Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Evonik Industries.
Diversification Opportunities for Norsk Hydro and Evonik Industries
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and Evonik is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries 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 Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Evonik Industries go up and down completely randomly.
Pair Corralation between Norsk Hydro and Evonik Industries
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 3.79 times more return on investment than Evonik Industries. However, Norsk Hydro is 3.79 times more volatile than Evonik Industries AG. It trades about 0.06 of its potential returns per unit of risk. Evonik Industries AG is currently generating about 0.01 per unit of risk. If you would invest 345.00 in Norsk Hydro ASA on September 14, 2024 and sell it today you would earn a total of 221.00 from holding Norsk Hydro ASA or generate 64.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Evonik Industries AG
Performance |
| Timeline |
| Norsk Hydro ASA |
| Evonik Industries |
Norsk Hydro and Evonik Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Evonik Industries
The main advantage of trading using opposite Norsk Hydro and Evonik Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Evonik Industries 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 Evonik Industries will offset losses from the drop in Evonik Industries' long position.| Norsk Hydro vs. Taylor Morrison Home | Norsk Hydro vs. American Homes 4 | Norsk Hydro vs. Haverty Furniture Companies | Norsk Hydro vs. Autohome ADR |
| Evonik Industries vs. BJs Restaurants | Evonik Industries vs. HOCHSCHILD MINING | Evonik Industries vs. QINGCI GAMES INC | Evonik Industries vs. International Game Technology |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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