Correlation Between Norsk Hydro and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum, you can compare the effects of market volatilities on Norsk Hydro and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Kaiser Aluminum.
Diversification Opportunities for Norsk Hydro and Kaiser Aluminum
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Kaiser is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Norsk Hydro and Kaiser Aluminum
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.86 times more return on investment than Kaiser Aluminum. However, Norsk Hydro is 1.86 times more volatile than Kaiser Aluminum. It trades about 0.07 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about -0.02 per unit of risk. If you would invest 347.00 in Norsk Hydro ASA on November 7, 2024 and sell it today you would earn a total of 213.00 from holding Norsk Hydro ASA or generate 61.38% 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. Kaiser Aluminum
Performance |
| Timeline |
| Norsk Hydro ASA |
| Kaiser Aluminum |
Norsk Hydro and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Kaiser Aluminum
The main advantage of trading using opposite Norsk Hydro and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Norsk Hydro vs. NorAm Drilling AS | Norsk Hydro vs. Major Drilling Group | Norsk Hydro vs. Mitsui Chemicals | Norsk Hydro vs. SILICON LABORATOR |
| Kaiser Aluminum vs. Merit Medical Systems | Kaiser Aluminum vs. UPDATE SOFTWARE | Kaiser Aluminum vs. Genertec Universal Medical | Kaiser Aluminum vs. Take Two Interactive Software |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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