Correlation Between Norsk Hydro and Snam SpA
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Snam SpA 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 Snam SpA 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 Snam SpA, you can compare the effects of market volatilities on Norsk Hydro and Snam SpA 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 Snam SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Snam SpA.
Diversification Opportunities for Norsk Hydro and Snam SpA
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and Snam is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA 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 Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Snam SpA go up and down completely randomly.
Pair Corralation between Norsk Hydro and Snam SpA
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 2.36 times less return on investment than Snam SpA. In addition to that, Norsk Hydro is 2.45 times more volatile than Snam SpA. It trades about 0.01 of its total potential returns per unit of risk. Snam SpA is currently generating about 0.03 per unit of volatility. If you would invest 423.00 in Snam SpA on September 2, 2024 and sell it today you would earn a total of 15.00 from holding Snam SpA or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Snam SpA
Performance |
| Timeline |
| Norsk Hydro ASA |
| Snam SpA |
Norsk Hydro and Snam SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Snam SpA
The main advantage of trading using opposite Norsk Hydro and Snam SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Snam SpA 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 Snam SpA will offset losses from the drop in Snam SpA's long position.| Norsk Hydro vs. TOREX SEMICONDUCTOR LTD | Norsk Hydro vs. Taiwan Semiconductor Manufacturing | Norsk Hydro vs. United Natural Foods | Norsk Hydro vs. Tyson Foods |
| Snam SpA vs. Burlington Stores | Snam SpA vs. Scandinavian Tobacco Group | Snam SpA vs. British American Tobacco | Snam SpA vs. LION ONE METALS |
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 CEOs Directory module to screen CEOs from public companies around the world.
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