Correlation Between Norsk Hydro and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Sims Metal 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 Sims Metal 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 Sims Metal Management, you can compare the effects of market volatilities on Norsk Hydro and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Sims Metal.
Diversification Opportunities for Norsk Hydro and Sims Metal
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Sims is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Sims Metal go up and down completely randomly.
Pair Corralation between Norsk Hydro and Sims Metal
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 4.09 times less return on investment than Sims Metal. In addition to that, Norsk Hydro is 1.09 times more volatile than Sims Metal Management. It trades about 0.02 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.07 per unit of volatility. If you would invest 637.00 in Sims Metal Management on September 15, 2024 and sell it today you would earn a total of 128.00 from holding Sims Metal Management or generate 20.09% 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. Sims Metal Management
Performance |
| Timeline |
| Norsk Hydro ASA |
| Sims Metal Management |
Norsk Hydro and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Sims Metal
The main advantage of trading using opposite Norsk Hydro and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Norsk Hydro vs. GALENA MINING LTD | Norsk Hydro vs. Cogent Communications Holdings | Norsk Hydro vs. GREENX METALS LTD | Norsk Hydro vs. T MOBILE US |
| Sims Metal vs. Reliance Steel Aluminum | Sims Metal vs. Superior Plus Corp | Sims Metal vs. SIVERS SEMICONDUCTORS AB | Sims Metal 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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