Correlation Between Norsk Hydro and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Methode Electronics 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 Methode Electronics 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 Methode Electronics, you can compare the effects of market volatilities on Norsk Hydro and Methode Electronics 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Methode Electronics.
Diversification Opportunities for Norsk Hydro and Methode Electronics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and Methode is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Methode Electronics go up and down completely randomly.
Pair Corralation between Norsk Hydro and Methode Electronics
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.91 times more return on investment than Methode Electronics. However, Norsk Hydro ASA is 1.1 times less risky than Methode Electronics. It trades about 0.03 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.04 per unit of risk. If you would invest 377.00 in Norsk Hydro ASA on September 25, 2024 and sell it today you would earn a total of 152.00 from holding Norsk Hydro ASA or generate 40.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Methode Electronics
Performance |
| Timeline |
| Norsk Hydro ASA |
| Methode Electronics |
Norsk Hydro and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Methode Electronics
The main advantage of trading using opposite Norsk Hydro and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| Norsk Hydro vs. Norsk Hydro ASA | Norsk Hydro vs. Alcoa Corp | Norsk Hydro vs. AMAG Austria Metall | Norsk Hydro vs. Kaiser Aluminum |
| Methode Electronics vs. Amphenol | Methode Electronics vs. Hon Hai Precision | Methode Electronics vs. Samsung SDI Co | Methode Electronics vs. Murata Manufacturing Co |
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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