Correlation Between Norsk Hydro and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and China BlueChemical 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 BlueChemical 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 BlueChemical, you can compare the effects of market volatilities on Norsk Hydro and China BlueChemical 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 BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and China BlueChemical.
Diversification Opportunities for Norsk Hydro and China BlueChemical
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and China BlueChemical go up and down completely randomly.
Pair Corralation between Norsk Hydro and China BlueChemical
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 2.28 times less return on investment than China BlueChemical. But when comparing it to its historical volatility, Norsk Hydro ASA is 1.54 times less risky than China BlueChemical. It trades about 0.07 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 24.00 in China BlueChemical on September 13, 2024 and sell it today you would earn a total of 2.00 from holding China BlueChemical or generate 8.33% 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 BlueChemical
Performance |
| Timeline |
| Norsk Hydro ASA |
| China BlueChemical |
Norsk Hydro and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and China BlueChemical
The main advantage of trading using opposite Norsk Hydro and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, China BlueChemical 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 BlueChemical will offset losses from the drop in China BlueChemical'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 |
| China BlueChemical vs. Superior Plus Corp | China BlueChemical vs. SIVERS SEMICONDUCTORS AB | China BlueChemical vs. NorAm Drilling AS | China BlueChemical vs. Norsk Hydro ASA |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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