Correlation Between Norsk Hydro and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings, you can compare the effects of market volatilities on Norsk Hydro and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and POSCO Holdings.
Diversification Opportunities for Norsk Hydro and POSCO Holdings
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and POSCO is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and POSCO Holdings go up and down completely randomly.
Pair Corralation between Norsk Hydro and POSCO Holdings
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to under-perform the POSCO Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Norsk Hydro ASA is 2.92 times less risky than POSCO Holdings. The stock trades about -0.56 of its potential returns per unit of risk. The POSCO Holdings is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 4,780 in POSCO Holdings on September 20, 2024 and sell it today you would lose (440.00) from holding POSCO Holdings or give up 9.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. POSCO Holdings
Performance |
| Timeline |
| Norsk Hydro ASA |
| POSCO Holdings |
Norsk Hydro and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and POSCO Holdings
The main advantage of trading using opposite Norsk Hydro and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.| Norsk Hydro vs. NORWEGIAN AIR SHUT | Norsk Hydro vs. Seven West Media | Norsk Hydro vs. DELTA AIR LINES | Norsk Hydro vs. Westinghouse Air Brake |
| POSCO Holdings vs. Reliance Steel Aluminum | POSCO Holdings vs. Superior Plus Corp | POSCO Holdings vs. SIVERS SEMICONDUCTORS AB | POSCO Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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