Correlation Between Norsk Hydro and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and NIPPON STEEL 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 NIPPON STEEL 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 NIPPON STEEL SPADR, you can compare the effects of market volatilities on Norsk Hydro and NIPPON STEEL 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 NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and NIPPON STEEL.
Diversification Opportunities for Norsk Hydro and NIPPON STEEL
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norsk and NIPPON is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and NIPPON STEEL go up and down completely randomly.
Pair Corralation between Norsk Hydro and NIPPON STEEL
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 2.58 times more return on investment than NIPPON STEEL. However, Norsk Hydro is 2.58 times more volatile than NIPPON STEEL SPADR. It trades about 0.06 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.11 per unit of risk. If you would invest 549.00 in Norsk Hydro ASA on September 15, 2024 and sell it today you would earn a total of 14.00 from holding Norsk Hydro ASA or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Norsk Hydro ASA vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| Norsk Hydro ASA |
| NIPPON STEEL SPADR |
Norsk Hydro and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and NIPPON STEEL
The main advantage of trading using opposite Norsk Hydro and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, NIPPON STEEL 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 NIPPON STEEL will offset losses from the drop in NIPPON STEEL's long position.| Norsk Hydro vs. AIR PRODCHEMICALS | Norsk Hydro vs. Spirent Communications plc | Norsk Hydro vs. X FAB Silicon Foundries | Norsk Hydro vs. Quaker Chemical |
| NIPPON STEEL vs. Reliance Steel Aluminum | NIPPON STEEL vs. Superior Plus Corp | NIPPON STEEL vs. SIVERS SEMICONDUCTORS AB | NIPPON STEEL 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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