Correlation Between Norsk Hydro and Computershare
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Computershare 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 Computershare 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 Computershare Limited, you can compare the effects of market volatilities on Norsk Hydro and Computershare 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 Computershare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Computershare.
Diversification Opportunities for Norsk Hydro and Computershare
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norsk and Computershare is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited 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 Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Computershare go up and down completely randomly.
Pair Corralation between Norsk Hydro and Computershare
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 2.66 times less return on investment than Computershare. In addition to that, Norsk Hydro is 1.81 times more volatile than Computershare Limited. It trades about 0.07 of its total potential returns per unit of risk. Computershare Limited is currently generating about 0.35 per unit of volatility. If you would invest 1,790 in Computershare Limited on September 13, 2024 and sell it today you would earn a total of 210.00 from holding Computershare Limited or generate 11.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Computershare Limited
Performance |
| Timeline |
| Norsk Hydro ASA |
| Computershare Limited |
Norsk Hydro and Computershare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Computershare
The main advantage of trading using opposite Norsk Hydro and Computershare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Computershare 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 Computershare will offset losses from the drop in Computershare'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 |
| Computershare vs. Cognizant Technology Solutions | Computershare vs. Superior Plus Corp | Computershare vs. SIVERS SEMICONDUCTORS AB | Computershare 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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