Correlation Between Norsk Hydro and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and LPKF Laser 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 LPKF Laser 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 LPKF Laser Electronics, you can compare the effects of market volatilities on Norsk Hydro and LPKF Laser 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 LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and LPKF Laser.
Diversification Opportunities for Norsk Hydro and LPKF Laser
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norsk and LPKF is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and LPKF Laser go up and down completely randomly.
Pair Corralation between Norsk Hydro and LPKF Laser
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.74 times more return on investment than LPKF Laser. However, Norsk Hydro ASA is 1.36 times less risky than LPKF Laser. It trades about -0.02 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.07 per unit of risk. If you would invest 591.00 in Norsk Hydro ASA on September 13, 2024 and sell it today you would lose (19.00) from holding Norsk Hydro ASA or give up 3.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. LPKF Laser Electronics
Performance |
| Timeline |
| Norsk Hydro ASA |
| LPKF Laser Electronics |
Norsk Hydro and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and LPKF Laser
The main advantage of trading using opposite Norsk Hydro and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser'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 |
| LPKF Laser vs. Schneider Electric SE | LPKF Laser vs. Superior Plus Corp | LPKF Laser vs. SIVERS SEMICONDUCTORS AB | LPKF Laser 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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