Correlation Between Norsk Hydro and Sandfire Resources
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Sandfire Resources 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 Sandfire Resources 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 Sandfire Resources Limited, you can compare the effects of market volatilities on Norsk Hydro and Sandfire Resources 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 Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Sandfire Resources.
Diversification Opportunities for Norsk Hydro and Sandfire Resources
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norsk and Sandfire is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Sandfire Resources go up and down completely randomly.
Pair Corralation between Norsk Hydro and Sandfire Resources
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 0.99 times more return on investment than Sandfire Resources. However, Norsk Hydro ASA is 1.01 times less risky than Sandfire Resources. It trades about 0.37 of its potential returns per unit of risk. Sandfire Resources Limited is currently generating about 0.26 per unit of risk. If you would invest 524.00 in Norsk Hydro ASA on October 20, 2024 and sell it today you would earn a total of 64.00 from holding Norsk Hydro ASA or generate 12.21% 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. Sandfire Resources Limited
Performance |
| Timeline |
| Norsk Hydro ASA |
| Sandfire Resources |
Norsk Hydro and Sandfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Sandfire Resources
The main advantage of trading using opposite Norsk Hydro and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Sandfire Resources 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 Sandfire Resources will offset losses from the drop in Sandfire Resources' long position.| Norsk Hydro vs. China BlueChemical | Norsk Hydro vs. TOMBADOR IRON LTD | Norsk Hydro vs. Mitsui Chemicals | Norsk Hydro vs. Olympic Steel |
| Sandfire Resources vs. Freeport McMoRan | Sandfire Resources vs. Southern Copper | Sandfire Resources vs. Antofagasta plc | Sandfire Resources vs. First Quantum Minerals |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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