Correlation Between Norsk Hydro and Penn National
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Penn National 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 Penn National 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 Penn National Gaming, you can compare the effects of market volatilities on Norsk Hydro and Penn National 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 Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Penn National.
Diversification Opportunities for Norsk Hydro and Penn National
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Norsk and Penn is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Penn National go up and down completely randomly.
Pair Corralation between Norsk Hydro and Penn National
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.13 times more return on investment than Penn National. However, Norsk Hydro is 1.13 times more volatile than Penn National Gaming. It trades about 0.03 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.02 per unit of risk. If you would invest 581.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Norsk Hydro ASA or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Penn National Gaming
Performance |
| Timeline |
| Norsk Hydro ASA |
| Penn National Gaming |
Norsk Hydro and Penn National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Penn National
The main advantage of trading using opposite Norsk Hydro and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Penn National 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 Penn National will offset losses from the drop in Penn National's long position.| Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB |
| Penn National vs. Sands China | Penn National vs. Superior Plus Corp | Penn National vs. SIVERS SEMICONDUCTORS AB | Penn National 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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