Correlation Between Norsk Hydro and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Southern Copper 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 Southern Copper 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 Southern Copper, you can compare the effects of market volatilities on Norsk Hydro and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Southern Copper.
Diversification Opportunities for Norsk Hydro and Southern Copper
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Southern is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Southern Copper go up and down completely randomly.
Pair Corralation between Norsk Hydro and Southern Copper
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 1.25 times less return on investment than Southern Copper. In addition to that, Norsk Hydro is 1.54 times more volatile than Southern Copper. It trades about 0.03 of its total potential returns per unit of risk. Southern Copper is currently generating about 0.07 per unit of volatility. If you would invest 5,182 in Southern Copper on September 13, 2024 and sell it today you would earn a total of 4,654 from holding Southern Copper or generate 89.81% 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. Southern Copper
Performance |
| Timeline |
| Norsk Hydro ASA |
| Southern Copper |
Norsk Hydro and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Southern Copper
The main advantage of trading using opposite Norsk Hydro and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper'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 |
| Southern Copper vs. Sandfire Resources Limited | Southern Copper vs. Superior Plus Corp | Southern Copper vs. NMI Holdings | Southern Copper vs. SIVERS SEMICONDUCTORS AB |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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